Dodd, Frank blast ruling that MetLife not too big to fail

Thu Jun 23, 2016 6:53pm EDT
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By Dena Aubin and Lisa Lambert

(Reuters) - A federal court's striking down of the government's designation of insurer MetLife Inc (MET.N: Quote) as "too-big-to-fail" could undermine efforts to head off another financial crisis, authors of the landmark Dodd-Frank Wall Street reform law said.

In a brief filed on Thursday with a federal appeals court, former Senator Chris Dodd, former Representative Barney Frank and 18 other heavyweight Democrats including Representative Nancy Pelosi said the decision could make it difficult to prevent another "calamitous financial meltdown."

At the same time, Ben Bernanke, who chaired the Federal Reserve during the 2007-2009 crisis, and Paul Volcker, another former Fed chairman who helped craft Dodd-Frank, filed a brief.

A major consequence of the decision "is that one of the world's largest, most highly interconnected financial institutions is left with inadequate oversight," they wrote.

In March U.S. District Court Judge Rosemary Collyer rescinded the government's 2014 designation of MetLife as a systematically important financial institution.

Dodd-Frank had created the Financial Stability Oversight Council, consisting of the heads of regulatory agencies, in part to identify firms that could wreck the U.S. financial system if they experience distress. The council's designations trigger stricter regulatory oversight and requirements to hold more capital.

Collyer called the MetLife designation "arbitrary and capricious," saying the council never adequately assessed the risk of Metlife's failure and neglected to perform a cost-benefit analysis of applying the designation.

The council laid out its arguments for its appeal of the decision in a brief filed last week.   Continued...

The MetLife building is seen in New York, March 8, 2010.    REUTERS/Shannon Stapleton/File Photo