Amity Shlaes pens a paean to MetLife in the latest issue of Forbes.
“THANK YOU, MetLife.”
That’s what we all ought to be saying this month, as the insurance company goes before a panel of federal judges to defend its bid to keep the MetLife name off of the federal government’s “Too Big to Fail” list.
The facts of MetLife v. Financial Stability Oversight Council are simple. After the 2008 financial crisis lawmakers passed the Dodd-Frank financial reform act. Dodd-Frank, in turn, created the FSOC, establishing a class of so-called systemically important financial institutions, or SIFIs. The SIFIs would be herded into a corral reinforced with heavy capital requirements and cumbersome regulations. The FSOC promptly herded big banks into its SIFI corral–and then for good measure took out its lasso to rope in insurance companies. The nonbank MetLife’s total balance-sheet assets as of 2013–when the FSOC made its move–stood at $900 billion, which makes MetLife more elephant than steer.
But this elephant has a habit of resisting federal lures, dating back to 2008, when MetLife, unlike fellow insurer AIG, didn’t take a Treasury rescue. MetLife also had the temerity to actually make money during the crisis years. Postcrisis, MetLife noted the obvious: The states, not Washington, regulate insurance companies. And insurance companies are less likely than banks to be subject to great runs on their resources: The first thing people do in a financial panic isn’t to cash out their life insurance policies. AIG’s rescue took place only because the insurer had, rodeo-style, developed a disconcerting sideshow in credit-default swaps. To prove its own bona fides, MetLife exited the banking business, selling MetLife Bank to GE Capital in 2013.
When the FSOC continued to pursue MetLife, the elephant went to court. (MetLife’s Steven Kandarian is an example of the difference an uncowardly CEO can make.) In March Judge Rosemary Collyer of the U.S. District Court for the District of Columbia rescinded MetLife’s “systemically important” designation. Share prices in MetLife and its fellow insurers rallied at prospects that the industry might elude the FSOC. The government promptly appealed, with Treasury Secretary Jacob Lew chastising Collyer in a nastygram for “overturning the conclusions of experienced financial regulators.” Elephants, even nimble elephants, must be corralled.
