Most people think of Better Markets solely as a Wall Street watchdog, but it is also a government watchdog, as illustrated in our 2012 court challenge against the Securities and Exchange Commission (SEC) and Citigroup when they sought court approval of a sweetheart settlement that sold out the public interest. We now face the Financial Stability Oversight Council (FSOC) and MetLife, and what appears to be a coordinated effort to kill the law protecting against more surprise meltdowns and bailouts like AIG.
In an unexpected and unprecedented move, MetLife is seeking an eleventh-hour stay of its lawsuit in the DC Circuit. As a legal matter, it’s a no brainer that FSOC should have vigorously opposed the stay, but late last Thursday FSOC surprisingly agreed to a minimum stay of 60 days.
Astonishingly, however, both parties failed to bring numerous material facts to the attention of the court. Better Markets has gone to court to oppose this serious breakdown of the adversary process—and potential miscarriage of justice—arguing that there should be no stay, and that the court should issue its decision promptly.
As stated in our court filings, MetLife’s lawsuit against FSOC is probably the most important legal case filed against the Dodd-Frank financial reform law. It is hard to overstate the importance of FSOC, comprised of the country’s top 15 financial regulators. As the only government entity with the power, authority, and duty to analyze and designate nonbank systemic threats, FSOC is a linchpin of financial reform and is essential to regulating the nonbank shadow banking system that was at the core of the 2008 crisis.
By way of background, in its lawsuit, MetLife wants the court to overrule FSOC’s designation of MetLife as a systemically significant nonbank threat to the stability of the US. To do that, MetLife is challenging FSOC’s core operating procedures and its interpretation of the law. MetLife won in the federal district court in DC and FSOC appealed to the DC Circuit. The appeal was fully briefed in 2016 and oral argument was held on October 24, 2016.
Now, more than six months after oral argument, while everyone was anticipating a decision from the appellate court at any moment, MetLife and its lawyers somehow persuaded President Trump to issue a custom-made executive memorandum to the Treasury Secretary, asking for a report in 180 days on FSOC’s designation process. The memorandum appeared to be a cut-and-paste of the district court opinion in favor of MetLife and of MetLife’s appeal briefs.
Not coincidentally, the very next business day, MetLife filed a motion in the appellate court that also appeared to be a cut-and-paste of the President’s memorandum. MetLife asked the court to stop the lawsuit for at least 180 days so that the Treasury Secretary could comply with the President’s request for the report. The DOJ, now under the political control of President Trump, but supposedly independently representing FSOC, filed a one-page non-response to the motion, merely asking for a 60-day delay, at which time it will file a status report.
As Better Markets pointed out in our court filings, this remarkable MetLife-tailored Presidential memorandum is nothing more than a political ploy designed to stop the appellate court from ruling against MetLife. It is the creation of a political process involving nonparties to shut down a legal proceeding. This is worse than forum shopping; it is forum-creating where the outcome is predetermined.
Confirming the necessity for Better Markets’ court filings, MetLife and FSOC failed to inform the court that the report in 180 days will have no power by itself to alter the designation process or the resolution of the legal case.
Neither the President, the Treasury Secretary, nor the report itself can change the record on which the FSOC based its decision to designate MetLife, the record on which the district court based its decision to vacate the designation, the law that the district court applied, or even the posture that the FSOC maintains in this appeal, as neither the Treasury Secretary nor the President are parties to the case. To alter its stance in this appeal, or to change its rules or guidance relating to the designation process, the FSOC’s ten voting members, acting as a separate and distinct entity created by law, would have to take affirmative action in accordance with its charter and procedures.
Better Markets has taken swift and decisive action to call out this political ploy, identified these critical omissions, and gone to court to stop this attempt to subvert the legal process and put US taxpayers—once again—in greater danger of future financial crashes and bailouts.
Better Markets focuses exclusively on promoting the public interest in the financial markets, support the financial reform of Wall Street’s too-big-to-fail firms, and make our financial system work for all Americans again. We possess the unique ability to advocate in all phases of policy development, including full rulemaking, litigation, legislation, research, and public media, advocacy capabilities, and as this most recent example proves, we are able and willing to move quickly and decisively when the public interest is at stake.