MetLife to Ask Federal Court to Review SIFI Designation
Commentary by Steven Lofchie
MetLife, Inc. announced that it intends to file an action in the U.S. District Court for the District of Columbia to overturn the designation by the Financial Stability Oversight Council ("FSOC") of the company as a non-bank systemically important financial institution ("SIFI").
Dodd-Frank Section 113(h) provides that any company designated as a SIFI may petition the federal courts for an order requiring that the final determination be rescinded.
Chair, President and CEO of MetLife Steve Kandarian stated that "FSOC's designation of MetLife is premature. FSOC has designated non-bank SIFIs before the rules governing these companies have even been written. The Council should wait until the rules are in place and it knows the impact on designated firms." He went on to say that it "is not enough to designate companies as SIFIs merely because they are big," and added that he looks forward to a legal review of the decision.
Commentary
How any court could determine that FSOC acted within or without the law is a mystery, since the statutory provision that establishes the basis for designation of a firm as systemically significant is inherently ambiguous. Section 113 of Dodd-Frank simply does not establish "law" as the term is commonly understood; it does not establish any objective rules that can be understood by those who would either be subject to it or interpret it. Congress should consider repeal of Section 113. It is inconsistent with a society that is intended to be governed by clear rules that can be understood by those who are governed by them. If, in considering repealing Section 113, Congress finds that it is appropriate to regulate large insurance companies or clearing companies, then it ought to pass a law allowing it to do so – a law that can be implemented by objective rules that citizens can read and understand, and that courts will be able to interpret in a consistent manner.
Until Dodd-Frank Section 113 is amended to provide for objective measures, we would just put it into the category of remarkable powers, even if not one expressly covered in today's YouTube selection.