Banks don't have a monopoly on systemic risk. While everyone remembers the collapse and subsequent bailout of global insurance company AIG back in 2008, other nonbanks like GE Capital, money market mutual funds, and the short-term wholesale funding markets also contributed significantly to the financial crash of 2008. That happened because banks and nonbanks alike were deregulated, unregulated and unpoliced.

Thus the Dodd-Frank Act created the Financial Stability Oversight Council to analyze high-risk, systemically significant nonbank financial firms and activities that would otherwise escape oversight or regulation. If the FSOC determines that a nonbank poses a possible systemic risk, that company is designated for enhanced supervision and regulation by the Federal Reserve.

The FSOC has been very deliberative and conservative in exercising this responsibility, designating only four nonbanks since 2010. But as the crisis recedes in memory, systemically significant nonbanks and their supporters are turning on the organization. They don’t want increased regulation because they want enormous bonuses in good times and taxpayer-funded bailouts in bad. As with AIG, this tactic privatizes gains but socializes losses.

At the center of the controversy over the FSOC is its recent designation of the gigantic global insurance company MetLife. Don’t let the cuddly Snoopy ads fool you: MetLife is a financial giant that operates in more than 60 countries. The FSOC carefully evaluated the company, analyzing MetLife for more than 17 months, reviewing tens of thousands of documents provided by MetLife, repeatedly meeting with company leaders and granting MetLife a full hearing to make its case.

The FSOC detailed its designation in a 341-page explanation, finding that MetLife “has higher total financial leverage and more total debt and operating debt than most of its peer life insurance organizations.” The FSOC also noted that MetLife engages in a variety of complex, high-risk financial activities — including funding agreement-backed securities, commercial paper issuance and securities lending activities. In the event of financial distress, all of these borrowing instruments could create liquidity problems for the company, which could be transmitted to the wider financial system.

Nevertheless, MetLife sued the FSOC to try to get a court to overrule its decision so it can avoid systemic regulation. MetLife’s allies have also relentlessly attacked the Council. However, it's clear there were compelling reasons for the FSOC’s actions, and the FSOC was thorough and fair in the process.

High-risk finance and its allies always claim that strict regulation imposes too heavy a cost on the private sector. But they fail to mention that years of deregulation and non-regulation set the stage for the unexpected financial explosions that were the hallmark of the 2008 crisis, imposing devastating costs on the American people. Preventing the next financial crash and saving tens of millions of Americans their jobs, homes and savings is well worth some additional regulatory costs.

If MetLife’s lawsuit succeeds and the FSOC's critics have their way, systemically significant nonbanks could wind up as unregulated as they were before the crisis. That would be asking for more surprises, bailouts, and another catastrophic financial crash.

Dennis Kelleher is president and CEO of Better Markets. Follow him on Twitter @BetterMarkets.