According to a January 22nd report from equity research firm Sterne Agee, mega life insurance just caught a lucky break with the assignment of the judge in the case appealing their Systemically Important Financial Institution (SIFI) designation.
Systemically Important Financial Institutions
Systemically Important Financial Institutions are banks, insurance companies or other financial institutions whose failure could contribute significantly to a financial crisis. The Dodd-Frank Act passed after the Financial Crisis called for SIFI institutions to be more highly regulated than other financial institutions, so of course all these megabanks denied that they were SIFIs and mounted legal challenges (as Metlife is doing). SIFIs are designated by the U.S. Federal Reserve.
Metlife catches break with Judge Rosemary Collyer
According to Sterne Agee analysts John M. Nadel, Wesley Carmichael and Michael A. Ward, Metlife caught a major break when Rosemary Collyer was assigned to preside over the insurer’s legal challenge of it’s recent non-bank SIFI designation.
The SA analysts note: “We believe this is a positive development as Judge Collyer was an appointee in 2003 under President Bush and has a record of ruling against government regulators, most notably ruling in 2011 and 2012 that the Environmental Protection Agency (EPA) and Federal Drug Administration (FDA) decisions were both arbitrary and capricious – the same standard MET must prove in its case against FSOC. Such a record is certainly a positive development early in MET’s case against its SIFI designation, although clearly there’s a long way to go in the process.”
Also of note, back in 2011, Judge Collyer ruled against the EPA in a case involving Nalco Holding Company, a maker of water treatment equipment. Nalco argued that an EPA order to stop selling one of its products was arbitrary and capricious, and the judge agreed.
Collyer also ruled against the FDA in a case against Prevor in 2012. Prevor argued that the FDA acted arbitrarily and capriciously in its decision to regulate one of their products as a drug instead of a medical device, and Collyer again agreed with the firm and ruled against the EPA.
Still a long way to go before case is decided
In the conclusion of the report, Nadel et al. point out that the legal case will probably take between 6-12 months, and could be appealed thereafter, That said, the “appointment of Judge Collyer to preside over the case certainly appears to be a positive development for Metlife. Her record of ruling against a few government regulatory agencies clearly indicates that her ultimate decision in Metlife’s case is unlikely to be swayed by political or other pressures.”
