By Lisa M. Goolik, J.D.
The Financial Stability Oversight Council is already appealing the decision by the U.S. District Court for the District of Columbia to rescind the FSOC’s designation of MetLife as a nonbank systemically important financial institution. After the opinion was unsealed on April 7, 2016, Treasury Secretary Jacob Lew warned that the court's decision "dangerously ignores the lessons of the financial crisis."
According to Lew, the designation was made after a thorough review, which concluded that "material financial distress at the company could threaten U.S. financial stability." Lew also pointed out that the "heads of every U.S. financial regulatory agency concurred" in the decision. By overturning the designation, the court imposed new requirements that Congress never enacted and "contradicted key
policy lessons from the financial crisis," said Lew.
"Wall Street Reform was enacted in response to serious problems identified during the financial crisis, and to protect taxpayers from having to bear the enormous burdens of another crisis. Regulators previously did not have the tools to understand and respond to the risks posed by the distress of companies such as MetLife. In using these tools, FSOC has taken a deliberative and data-driven approach, relying on a careful analysis of available information, including intensive engagement with each company and its regulators to evaluate how the firm’s distress could affect the financial system," said Lew.
Lew was not alone in his criticism. Sen. Sherrod Brown (D-Ohio), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, also released a statement, reminding the public that “massive non-bank institutions like AIG and Lehman Brothers were central to the last financial crisis” and that the Dodd-Frank Act was created to protect taxpayers when “too big to fail” institutions go unchecked. “Any actions that could undermine or hamstring that important oversight mission are steps in the wrong direction, and potentially sow the seeds of another crisis that would once again expose U.S. taxpayers to risky Wall Street practices,” warned Brown.
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