WASHINGTON — MetLife is calling on a federal court to table an ongoing appeal of a ruling that struck down its designation as a systemically important financial institution, saying the new administration’s review of the designation process could moot the issue.
The insurer filed its motion Monday asking the DC Circuit Court to hold the appeal, MetLife v. the Financial Stability Oversight Council, in abeyance pending the publication of a report by Treasury Secretary Steven Mnuchin examining the FSOC’s nonbank SIFI designation process.
That report was called for by President Trump called for that report in an executive order signed April 21 that asked the secretary, who also chairs the FSOC, to make sure that “these processes for making determinations and designations promote market discipline and reduce systemic risk” and entities being considered for a designation are “afforded due, fair and appropriately transparent process.” The report is due Oct. 18.
The motion says that courts routinely hold legal proceedings in abeyance — that is, table them pending some kind of internal review — when new administrations take power in order to give the new president a chance to consider whether it wants to move in a different direction.
“If the Treasury Secretary’s inquiry confirms that FSOC followed flawed procedures when designating MetLife, those findings should prompt the government to reconsider its position on one of more issues in this appeal or conclude that it is no longer appropriate to pursue this appeal at all,” MetLife said in its motion. “At a minimum, the report could substantially inform this Court’s consideration of the parties’ arguments and the district court’s decision in this case.”
MetLife further said that the court should not issue a ruling while the Treasury is conducting its review because such a ruling could reverse the lower court’s decision, thus designating the company a SIFI despite the executive order’s clear direction that new firms should not be designated while the review is ongoing.
“Issuing an opinion during the ongoing review … would deny the new administration the opportunity to ensure that the government’s positions in this litigation are consistent with the findings of the Treasury Secretary’s forthcoming report,” MetLife argued. “Moreover, if this Court were to issue an opinion reversing the district court’s decision … [it] would directly undermine the President’s clear instruction to the Treasury Secretary that there should be a ‘pause of determinations and designations’ ” until the report is complete.
Dodd-Frank created the FSOC, whose members consist of the heads of the various financial regulatory agencies, to identify and mitigate potential risks to the financial system like those that led to the 2008 financial crisis. The council is empowered to designate nonbanks as SIFIs and thus subject them to heightened prudential and supervisory requirements like those the Fed imposes on SIFI banks.
The FSOC has only designated four nonbanks as SIFIs — GE Capital, MetLife, American International Group and Prudential. It rescinded GE Capital’s designation last June, and MetLife sued the council soon after its designation and prevailed in the DC District Court.
The FSOC appealed to the DC Circuit Court, whose judges seemed sympathetic to the government’s case. The council has not taken any actions since the election concerning the case despite some pressure from lawmakers for Mnuchin to drop the FSOC appeal.
MetLife had no further comment beyond the brief. An FSOC spokesperson was not immediately available for comment.