Court Rules FSOC Failed to Show MetLife Is a Threat to US Stability
The FSOC had argued that financial distress at MetLife could pose a threat to financial stability in the U.S., but the court decided that the FSOC, within the context of its own rules, “never established a basis for finding that MetLife’s material financial distress would ‘materially impair’ MetLife counterparties.”
The decision highlights a few other problems with FSOC’s designation process, particularly its lack of transparency and clear standards. The bigger problem, though, is the very existence of FSOC. Empowering a group of regulators to impose regulations tailored to specific firms, based on the notion that those companies might “pose a threat to the financial stability of the U.S.” is wholly incompatible with the functioning of a dynamic private capital market.
There appears to be little chance that Congress will get rid of the FSOC (or Dodd-Frank, the monster bill that created the FSOC) anytime soon, but there are many marginal improvements that could be made until a full repeal is possible. By the end of this week, the House will have voted on two such reforms.
The FSOC had argued that financial distress at MetLife could pose a threat to financial stability in the U.S., but the court decided that the FSOC, within the context of its own rules, “never established a basis for finding that MetLife’s material financial distress would ‘materially impair’ MetLife counterparties.”
The decision highlights a few other problems with FSOC’s designation process, particularly its lack of transparency and clear standards. The bigger problem, though, is the very existence of FSOC. Empowering a group of regulators to impose regulations tailored to specific firms, based on the notion that those companies might “pose a threat to the financial stability of the U.S.” is wholly incompatible with the functioning of a dynamic private capital market.
There appears to be little chance that Congress will get rid of the FSOC (or Dodd-Frank, the monster bill that created the FSOC) anytime soon, but there are many marginal improvements that could be made until a full repeal is possible. By the end of this week, the House will have voted on two such reforms.