MetLife wins court case challenging ‘too big to fail’ label

Insurance company MetLife has won its legal battle against the federal government over its “too big to fail” label.

A federal judge Wednesday ruled that the insurance company does not qualify as a “systemically important financial institution” (SIFI), a label financial regulators tried to place on the company at the end of 2014. Facing stricter oversight and heightened rules under that designation, MetLife took the government to court to challenge the decision.

{mosads}The details of the ruling were not immediately available, as U.S. District Judge Rosemary Collyer issued it under seal, according to The Wall Street Journal.

The ruling is a major setback for federal regulators, who have been rebuffed in the use of one of their central post-crisis powers.

The Dodd-Frank financial reform law created the Financial Stability Oversight Council (FSOC), a panel of top financial regulators from across the government, and charged it with monitoring the overall health of the financial system. One of the FSOC’s central powers was its SIFI designation, which allowed it to identify firms that would pose a threat to the entire financial system if they were to fail.

The FSOC has already labeled the largest U.S. banks as SIFIs, as well as other major financial nonbanks, like American International Group and Prudential Financial.

The panel determined that MetLife merited a SIFI designation in December 2014, which led to the insurance company deciding to fight that decision in court. MetLife was the first company to mount a legal challenge to such a designation.

Republicans and business groups long critical of FSOC and its methods heaped praise on Wednesday’s ruling.

The U.S. Chamber of Commerce, which filed a brief in favor of MetLife during the case, argued FSOC was “arbitrarily” designated the biggest firms and urged a more transparent process. And House Financial Services Chairman Jeb Hensarling (R-Texas) vowed his panel would take up legislation overhauling the designation process.

“Today’s SIFI designations are just tomorrow’s taxpayer-funded bailouts,” he said in a statement. “SIFI is Washington’s way of officially anointing these companies as too big to fail.”

This post updated at 1:23pm.