OPINION:
An unaccountable force created in the shade of the Dodd-Frank financial reform law, which was sold as something to make all economic rough places plain, has put insurance giant MetLife in the fight of its life. Insurance companies, like lawyers, rarely attract the warm and cuddly blessings of the masses, but for the sake of the free market and American business, it’s a struggle that MetLife can and must win.
MetLife appears perfectly healthy and well-run, a model business in America in the economy that, finally, seems to be rebounding. Over the past five years, MetLife managed to put away $1 billion more in its reserves than it paid out in claims.
Further, MetLife didn’t ask for or receive bailouts over the worst of the recession, even when Washington decision-makers were passing them out like free toothbrushes from the dentist. Nevertheless, the financial wizards in the Obama administration have decided, over the protests of MetLife, to declare the insurance giant as “too big to fail.” This opens a “too big to fail” company to onerous additional government controls.
Several months ago, the government decreed that MetLife is a “systemically important financial institution” that could pose a threat the financial stability of the United States if it hit lethal financial headwinds.
This makes MetLife subject to an array of federal rules originally intended for banks, including limits on short-term debt, risk-based capital and leverage, overall risk management, resolution plans and early remediation, public disclosure and stress-testing.
MetLife says this mountain of regulations and stifling capital rules “will harm competition, lead to higher prices and less choice for consumers and ultimately could result in [weaker] financial protections for middle-class families.” Many financial instruments available through MetLife, such as the variable annuities that many Americans now rely on in their retirement, will likely vanish altogether.
The “too big to fail” label can be interpreted as “too big to succeed,” or at least “too big to be left alone by Washington.” The government, alas, is always standing by to “help,” confusing “help” with “hindrance.” Other insurers, including AIG, Prudential and GE, have folded before the threatened wrath of the Financial Stability Oversight Council, submitting to onerous guidelines intended to restrain banks from playing fast and loose with customers’ cash. These companies decided it would be better, or at least cheaper, to switch than fight. MetLife, however, appears less willing to lean over to take the whipping.
MetLife is considering challenging the Dodd-Frank rules in court, as well it should. It is vital that American business put its foot down and fight. If it doesn’t, such overregulation will spread from company to company until the U.S. economy is suffocated by the unintended consequences of the not-so-wise Washington wise men.
The next Congress has the opportunity to put things right when it convenes Jan. 6. A much-needed cure is expected to revise Dodd-Frank and remove insurers from having to comply with a number of rules that were clearly intended only for banking institutions. The economy has taken a severe beating over the Obama years, and a successful challenge of onerous and unnecessary rules may be just the insurance, and the reassurance, the economy needs to move briskly forward. Reasonable and fair regulation is one thing, but the economy will never breathe free, and prosper, under the thumb of government.
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