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MetLife SIFI Debate Continues

MetLife CEO Steven Kandarian attended the hearing earlier this month that was the company requested to dispute the FSOC’s proposed designation of MetLife as systemically important, according to Bloomberg. To aid in its fight against designation, MetLife has hired Eugene Scalia, the Gibson Dunn partner who has successfully litigated cases to overturn financial regulations.   

In a recent piece for The New York Times’ Dealbook, Stephen J. Luben asked “If not MetLife, who?” He pointed to the company’s $214 billion bond portfolio, comparing it to AIG. According to Luben, the story of AIG “show[ed] the potential for insurance companies to slide into activities more commonly associated with broker-dealers or hedge funds.” Luben suggested that it is unlikely that the FSOC will change course on the designation, it could be a prerequisite for a potential challenge in federal court. Luben dismissed MetLife’s argument that it weathered the financial crisis, encouraging regulators to “get out ahead of a potential problem for a change” instead of simply focusing on the most recent crisis. In addition, Luben suggests that asset managers could be next in line for potential designation and stated that if institutions “start to do things that only the big players used to do, additional regulation should follow.”

Chris Stern of MetLife’s media relations team responded that Luben’s arguments are not grounds for SIFI designation. Stern stated that “Dodd-Frank makes clear that size alone does not make a company systemic” and thus the size of MetLife’s bond portfolio is but one of eleven factors in the SIFI designation process. Stern also argued that it was AIG’s “non-insurance Financial Products division” and not the insurance business that led to the company’s collapse. Stern noted that Metlife is a “traditional life insurance company, with virtually all of our assets and liabilities residing in regulated insurance entities - a far different business model from the pre-crisis AIG.” Lastly, Stern argued that the FSOC’s decision must be made “based on the company we are today,” and not “what the company might become tomorrow.”