The Obama administration approached an appeals court Thursday to make its case on why
MetLife Inc. should remain under government oversight through the Federal Reserve.
The move is the administration’s latest bid to overturn a federal judge’s decision that revoked the “systemically important” label of the insurer.
The administration produced a 98-page brief for the U.S. District Court of Appeals for the District of Columbia. According to the brief, the Financial Stability Oversight Council “found that MetLife’s size, leverage, interconnectedness, potential liquidity risk, and complexity could cause material financial distress at MetLife to threaten the U.S. financial system.”
It was U.S. District Judge Rosemary Collyer that ruled in March that MetLife’s distress would not put the economy at risk, contrary to what regulators have said. Judge Collyer reasoned that the government’s findings included baseless speculations that did not consider the potential losses sustained by MetLife and its counterparties.
In April, the Justice Department—representing the administration—appealed Judge Collyer’s decision.
The administration maintained its argument that policymakers were not obligated to undertake another assessment under the law in making the determination; it also called the court’s review of the guidance “profoundly mistaken.”
In the brief, the government further asserted that of the 10 factors the council is required to consider in evaluating a firm as a “systemically important,” none of them require the council to evaluate the probability that the company could experience material financial distress or to approximate specific counterparty losses.
“The council did not set itself the impossible task of predicting the precise impact of a company’s distress on its counterparties and the broader market,” the government brief read.
The government also argued that policymakers were not required to perform a cost-benefit analysis along with a decision.
A MetLife spokesman said that the company would prepare a response to the government’s brief by its filing period on Aug. 15, reported
The Wall Street Journal.
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