MetLife is ‘too big to fail,’ US tells sceptic judge

New York/Washington, June 17: The US government laid out its arguments against a federal judge’s decision to strike down the designation of life insurer MetLife as “too big to fail” in a brief filed late on Thursday, showing how it intends to defend a key provision of the Dodd-Frank Wall Street refor m law.

MetLife sued the US gover nment last year, saying the Financial Stability Oversight Council (FSOC), made up of the chiefs of US financial regulatory agencies, used a flawed processindeterminingitcould hurt the US financial system if it faced financial distress.

On March 30, US district judge Rosemary Collyer rescinded the designation and the federal government appealed in the US District Court of Washington, DC.

“The district court’s ruling in this case overtur ned the collective judgment of the heads of every US financial regulatory agency and left one of the largest financial companies in the world subject to even less oversight than before the financial crisis,” a Treasury spokesman said in a statement on Thursday, adding the government plans to “vigorously defend” the FSOC’s work.

MetLife, the largest US life insurer, has until August to respond and oral arguments are expected in the autumn. Both sides say the case could reach the US Supreme Court.

Collyer’s decision centred on the analysis FSOC conducted to make its 2014 determination that MetLife is a “systemically important financial institution”. Saying that it had failed to review the likelihood that MetLife would fail, and in view of potential losses to counterparties, and costs imposed on MetLife by the label, she called the determination “arbitrary and capricious”.

In its brief, the gover nment said the council is not required to consider the likelihood of failure or “estimate specific counterparty losses or produce quantitative projections of the harm that would result”.

“The 2008-2009 financial crisis demonstrated that the sudden,unforeseenfailuresof large financial companies can have sweeping,unpredictableramifications,”itadded. Reuters