U.S. Not Able To Prove MetlLife Is “To Big To Fail,” Says Judge
By Jose de la Cruz | Apr 08, 2016 09:06 AM EDT
U.S. District Judge Rosemary M. Collyer unsealed a court ruling on Thursday that put in question a key measure of the Obama government that could prevent the repeat of the 2008 financial crisis. The ruling criticized the Obama administration for its process of labeling MetLife, the giant insurance company, as "too big to fail."
If the designation by the government sticks, the insurance company will be forced to set aside a greater financial cushion and create other safeguards that will protect taxpayers should it fall into financial difficulties.
However, the designation process used by the government is "fatally flawed," according to the judge.
"This Court cannot affirm a finding that MetLife's distress would cause severe impairment" on the financial markets," said the ruling.
The government's designation process was also "arbitrary and capricious," wrote the U.S. Judge.
However, Jack Lew, U.S. Treasury Secretary disagreed strongly with the judge's decision and said the Obama administration would strongly defend the work done by the Financial Stability Oversight Council.
The FSOC is a group composed of a number of U.S. regulatory agency chiefs which was tasked to give the designation to MetLife as a systemically vital financial organization in 2014.
Four non-bank companies have already been given this kind of label that the present administration deems would gravely affect the financial system if they go bankrupt.
Financial institutions outside of banks are not traditionally examined closely by the government. However, since the huge AIG insurance company almost collapsed in 2008, requiring $182 billion bailout from taxpayers' money, legislators have been calling for stricter oversight of this financial sector.
MetLife, the biggest life insurance in the country said it was thinking of breaking up the company to avoid the labeling, which induces more regulations.
"This decision leaves one of the largest and most highly interconnected financial companies in the world subject to even less oversight than before the financial crisis," said Lew in a statement on Thursday. "I am confident that we will prevail," he added.
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