MetLife (MET) showed how it intends to fight federal regulators’ arguments that it is “too big to fail” in a court brief filed Monday and added a new issue to its contention they used a flawed process to determine the company could damage the U.S. financial system if it faces distress.
On March 30, U.S. District Judge Rosemary Collyer rescinded the “systemically important financial institution” designation of MetLife made by the Financial Stability Oversight Council, which consists of the heads of all financial regulatory agencies. The designation, created in the 2010 Dodd-Frank Wall Street reform law, can put companies under additional regulation and force them to hold more capital.
The federal government appealed in the U.S. District Court of Washington, D.C., filing its brief in June. Supporters, notably former Senator Chris Dodd and former Representative Barney Frank, followed with amicus briefs.
In its response, MetLife restated past arguments that FSOC deviated from its own processes in making the designation, did not consider the effects of designation and that the designation was “preordained from the outset.”
It also brought up its past requests “that, as an alternative to costly company-specific designations of insurers, FSOC consider an activities-based approach that would subject any systemically risky activities undertaken by insurers to regulation on an industry-wide basis.”
FSOC had said that it could not use an activities-based designation method under statute. In April, however, the council announced it will use an activities-based approach for regulating risk in asset managers and mutual funds, leaving MetLife to call its fairness into question.
“FSOC’s refusal to consider an activities-based approach in designating MetLife was particularly arbitrary because it is currently pursuing that approach for asset managers,” the insurer wrote in its brief.
“Many of the largest mutual funds have assets under management that vastly exceed MetLife’s assets, and their liquidation could have a substantially larger impact on market prices than the liquidation of an insurer like MetLife.”