In one of the most important challenges to the Dodd Frank financial reform law ever brought before the courts, MetLife is desperately attempting to avoid rules that protect our financial system and taxpayers from the threat it poses to the financial stability of the United States. MetLife’s lawsuit is on appeal to the Federal Court of Appeals in D.C. and, at the eleventh hour and more than six months after oral argument, MetLife filed a Motion to stop the court from issuing its decision. It claimed that an executive order by President Trump to the Treasury Secretary to “study” FSOC’s designation process requires this outcome. However, this is nothing but a baseless attempt to short circuit a legal case with a legally unrelated political maneuver.
This is as unprecedented as it is inappropriate. Think about this: someone got the President of the United States to issue an executive order for the apparent purpose of helping a specific party in pending legal action before the Federal Court of Appeals in DC. Proving the political shenanigans here, the President’s executive order (issued late on a Friday) was a cut-and-paste of MetLife’s brief in the appeal court and then MetLife’s Motion (filed the next Monday) to stop the case was a cut-and-paste of the executive order. Obviously, none of this would have been done if MetLife thought it was going to win the legal case, i.e., FSOC was going to win (or at least MetLife thought so).
Given that, you would have expected FSOC to strongly oppose any delay, but the DOJ, supposedly representing FSOC, filed an embarrassing one-page response to MetLife’s Motion, basically capitulating to MetLife’s request for a 60-day delay. This suggests that DOJ failed to provide FSOC with independent legal advice due to its conflicts of interest in representing other clients at the same time (i.e., President Trump and the Treasury Secretary). This is an egregious breakdown of the adversary system and a potential miscarriage of justice.
On May 8th, Better Markets filed its Motion asking the Court to accept its amicus brief exposing MetLife’s attempt to delay the case for what it was: A political ploy designed to circumvent the judicial process. In its brief, Better Markets drove home three key arguments that neither MetLife nor the DOJ had brought to the Court’s attention.
First, the review ordered by Trump is fundamentally irrelevant to the pending appeal, since it will be conducted by a non-party to the suit, it will contain findings that one can only speculate about, and it will have no binding effect on FSOC, the party to the appeal. The report therefore provides no basis for putting the case on hold. To drive home this point, it was especially important to challenge MetLife’s attempt to equate the “Administration” with FSOC—an independent agency comprised of and governed by 15 representatives from other financial regulators.
Second, a six-month delay of the appeal would harm the public in two ways: It would leave intact a district court decision that continues to expose the public to the threat of systemic instability posed by MetLife, and it would continue to impair the ability of the FSOC to apply its designation authority to other systemically dangerous nonbanks.
Finally, MetLife’s motion for a stay and the DOJ’s response indicate that the adversary process in the appeal has broken down and that it may be appropriate for the Court to consider disqualifying the DOJ from continuing to represent FSOC. After all, FSOC’s interest lies in vigorously pursuing the appeal and fighting to overturn the lower court’s decision. Its stunning lack of opposition, and its consent to a two-month stay just to consider the matter, indicates that the DOJ—which also represents the President and the Treasury Secretary—is not providing the independent unconflicted representation that the FSOC needs and deserves.
In its May 12th order accepting Better Markets’ amicus brief, the Court granted Better Markets’ Motion and accepted the Amicus brief. It then denied MetLife’s Motion for a 180-day delay, but granted FSOC’s request for 60 days to consider and respond to MetLife’s motion. The court took no action on the suggestion to disqualify DOJ, but that issue will return in 60 days when FSOC has to file a status report with the court. Better Markets will be watching.