Regulation: Americas largest life insurer vows to take its fight against the administrations too big to fail overregulation to court. By digging in its heels, MetLife could inspire needed reforms. By branding MetLife and other big insurers systemic risks, the Obama administration wants to bring the insurance industry under the Feds thumb. This would unnecessarily subject insurers to tougher capital rules and other costly new banking regulations under the Dodd-Frank Act. The risks tag would also eat into their profits. Even so, competitors Prudential, AIG and GE have all caved into the federal encroachment. Not MetLife. In an SEC filing last week, the firm revealed that its demanded an evidentiary hearing with the Financial Stability Oversight Council, the Dodd-Frank-created uber-regulatory body that has the power to apply the systemically important label, thereby controlling risk-taking throughout the financial industry. (Under such a label, MetLife would be subjected to the full scope of Fed banking regulations: risk-based capital and leverage, liquidity, stress-testing, overall risk management, resolution plans and early remediation, public disclosure and short-term debt limits.) MetLife wants the 10-member council — headed by Obamas former chief of staff, Treasury Secretary Jack Lew — to explain why MetLifes failure would pose a risk to the financial system. We too are curious. What exactly makes it systemic? The life insurer is a nonbank that engages in traditional insurance activities that had nothing to do with the financial crisis. And these activities are already closely watched by New York regulators. MetLife also wants to know why the council didnt first consult with company officials before making such an industry-changing decision. This is a common criticism of the council. Made up mostly of political appointees who have no idea how insurance companies are run, it appears to use no hard criteria for deciding whether an institutions distress would cause instability in the U.S. financial system. Council reports have substituted vague language for metrics, calling designees significant market players who are significantly interconnected in the financial system and whose failure may cause significant harm to the broader economy. Data? Forget about it. In each case, the council has failed to conduct a detailed analysis. The final designation of MetLife promises to be no less arbitrary and capricious. MetLifes fight has focused much-needed light on the shadowy council — and the councils starting to sweat under the heat. Earlier this week, after MetLifes hearing request, the council said that it would review its evaluation process. The move no doubt was designed to fend off growing criticism, even from some Democrats. Rep. Carolyn Maloney, for one, says that the process has created needless uncertainty and wants the council to speak with insurers before deciding their fate. Gee, what a novel idea. At a minimum, the council should seek early input from industry in such decisions. Until that happens, Congress must step in and pressure it to reform its tyrannical ways. Read More At Investors Business Daily: news.investors/…/100814-720864-metlife-stands-up… Follow us: @IBDinvestors on Twitter | InvestorsBusinessDaily on Facebook
Posted on: Thu, 09 Oct 2014 00:01:36 +0000
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