Obama’s Peanut-Brained Attack on MetLife - Why should an insurance company be treated like a bank?

Obama’s Peanut-Brained Attack on MetLife

Why should an insurance company be treated like a bank?

By John Berlau

http://www.nationalreview.com/article/392174/obamas-peanut-brained-attack-metlife-john-berlau

One day while sitting on the roof of his doghouse, Snoopy supposedly penned a letter to our nation’s tax collectors that read, “Dear IRS: Please take me off your mailing list!” (The story’s provenance is a matter of debate, but it’s become a part of Snoopy lore.) Now, however, an arbitrary action by an unaccountable government entity may prompt MetLife’s longtime “spokesdog” to revise his apocryphal letter: “Dear FSOC: Please take MetLife off your too-big-to fail list.”

The Financial Stability Oversight Council (FSOC) is a secretive, unaccountable task force of financial bureaucrats of various agencies that was created by the Dodd-Frank “financial reform” bill that was rammed through a Democrat-controlled Congress in 2010. A few weeks ago, FSOC designated MetLife as a “systemically important financial institution” (SIFI). This means the federal government considers MetLife to be “too big to fail,” making it subject to the same Dodd-Frank bailout regime set up for big Wall Street banks like Goldman Sachs and JPMorgan Chase.

As my organization, the Competitive Enterprise Institute (CEI), argues in a legal challenge to the Dodd-Frank Act (including the FSOC’s role of identifying risk), the SIFI designation confers on a firm a strong competitive advantage, as investors and creditors know the government won’t let it fail. That’s why big banks and MetLife competitor American International Group (AIG), which have already received billions in taxpayer bailouts, have eagerly embraced their SIFI status.

But MetLife, to its credit, has publicly stated that it is not too big to fail and does not want the special privileges that come with SIFI status. MetLife chairman and CEO Steven A. Kandarian declared last year, “I do not believe that MetLife is a systemically important financial institution.” The insurance company, in fact, recently informed its shareholders that it may even sue the Obama administration to escape the “systemically important” designation that some competitors covet.

Unlike AIG and the big banks, MetLife has never taken a dime in taxpayer bailouts. It is asking not for a handout, but for the federal government to keep its hands off of the successful business model it has used to serve customers for over a century.

To use another “Peanuts” analogy, the FSOC’s designating MetLife a SIFI is like a bully’s taking Charlie Brown’s lunch money to subsidize Pigpen’s rolling in the dirt, because under Dodd-Frank, when one SIFI fails, all the other SIFIs pay its bailout costs. As my colleague Iain Murray explains:

[T]here are two classes of SIFIs — 1) the high-rolling institutions that may be tempted to take unreasonable risks with the money people have entrusted to them, and 2) the large stable firms that actually have the money (again, entrusted to them by clients) that can be expropriated by government to pay for the mistakes of the first class.

Given the fact that the FSOC did not publicly acknowledge its action or give any reason for it — news of the SIFI designation came from MetLife itself — it’s reasonable to conclude that the conservatively managed MetLife is in the second category. For MetLife customers, this will mean higher premiums and fewer services.

And that’s not the worst part. As  I have written previously on NRO, under the Federal Reserve’s interpretation of  Dodd-Frank’s Collins amendment, sponsored by liberal Republican senator Susan Collins (Me.), insurance companies with a small thrift operation — or even those, like MetLife,  without any banking component but deemed “systemically important” by the FSOC — will face the same capital standards that banks do.

This is a practice that strikes even an arch-liberal lawmaker such as Senator Sherrod Brown (D., Ohio) as absurd. “I want strong capital standards, but they have to make sense,” Brown said recently. “Applying bank standards to insurers could make the financial system riskier, not safer.”

Imposing bank-capital standards on insurers would raise costs for life-insurance consumers by $5 billion to $8 billion, according to the economic consulting firm Oliver Wyman. These costs could hit policyholders through both higher premiums and reduced benefits. And some policies simply could become unavailable as insurers “exit certain product lines,” the Oliver Wyman study found.

Among the product lines that could disappear or become prohibitively expensive are variable annuities, an increasingly popular retirement option. MetLife CEO Kandarian remarked last year, “It is hard for me to see how life insurers living under [bank-centric rules] could remain in the variable-annuity business.”

MetLife

John M. Keane is a director at MetLife, Inc., a friend of David H. Petraeus, and was a senior adviser for KKR & Co. LP.

Note: David H. Petraeus is a friend of John M. Keane, married to Hollister K. Petraeus, and the KKR Global Institute chairman for KKR & Co. LP.

Hollister K. Petraeus is married to David H. Petraeus, and helped establish the Consumer Financial Protection Bureau.

Consumer Financial Protection Bureau is a bureau for the Federal Reserve System.

Elizabeth Warren oversaw the creation of the Consumer Financial Protection Bureau, and was the assistant to the president congressional panel for bailout oversight chair for the Barack Obama administration.

John J. Mack is a senior adviser for KKR & Co. LP, was a participant at the Bankers White House meeting (12/14/09), the president & CEO for Credit Suisse First Boston, the co-CEO for the Credit Suisse Group, the chairman & CEO for Morgan Stanley, and attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail).

Credit Suisse First Boston is the former name for the Credit Suisse Group.

Credit Suisse Group was the borrower for the Bailout - Money Market Mutual Fund Liquidity, and the   borrower for the Bailout - Term Auction Facility.

Morgan Stanley was the buyer & seller for the Bailout - Agency Mortgage-Backed Securities Purchase Program, the borrower for the Bailout - Primary Dealer Credit, the borrower for the Bailout - Term Securities Lending, and the option holder, for the Bailout - TSLF Options Program.

Steven L. Rattner was a managing director for Morgan Stanley, attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail), a trustee at the Brookings Institution (think tank), is a frequent guest on Morning Joe, and at a director at the New America Foundation.

Andrew Ross Sorkin is a frequent guest on Morning Joe, and the author of Too Big to Fail.

Foundation to Promote Open Society was a funder for the Brookings Institution (think tank), and the New America Foundation.

George Soros was the chairman for the Foundation to Promote Open Society.

Susan M. Collins was a senior fellow at the Brookings Institution (think tank), voted for the Financial markets bailout bill (Senate-10/1/08), a commissioner for the Maine Department of Professional and Financial Regulation, and is a U.S. Senate senator.

James Dimon attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail), a participant at the Bankers White House meeting (12/14/09), a director at the Federal Reserve Bank of New York, the chairman & CEO for the Bank One Corporation, and is the chairman & CEO for JPMorgan Chase & Co.  

Federal Reserve Bank of New York provided March 2008 bailout for the Bear Stearns Companies Inc., and is an advisory committee for the Investor Advisory Committee on Financial Markets.

Bank One Corporation is a merged company with JPMorgan Chase & Co.

JPMorgan Chase & Co. is helping in subsidiary sales for American International Group, Inc. (AIG).

American International Group, Inc. (AIG) is a recipient for the Bailout - AIG Revolving Credit, a recipient for the Bailout - AIG Securities Borrowing, and a Troubled Asset Relief Program (TARP) participant.

Bank of America Corp. received payment through AIG federal bailout.

Citigroup Inc. received payment through AIG federal bailout.

Deutsche Bank received payment through AIG federal b for ailout.

Federal Reserve Bank of New York provided bailout loans for (AIG).

Goldman Sachs Group Inc. received payment through AIG federal bailout.

Merrill Lynch & Co., Inc. received payment through AIG federal bailout.

UBS AG received payment through AIG federal bailout.

Wachovia Corporation - received payment through AIG federal bailout.

Barclays Bank, Plc received payment through AIG federal bailout.

H. Rodgin Cohen was an adviser for the Wachovia Corporation, an adviser for Barclays Bank, Plc,an ad.viser for Bear Stearns Companies Inc., an adviser for the Bank of New York, an adviser for Lehman Brothers Holdings Inc., attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail), is an adviser for the American Express Company, and an outside counsel for Fannie Mae.

American Express Company was a Troubled Asset Relief Program (TARP) participant.

Fannie Mae contributed to, through mortgage purchases & mortgage-backed securities for the 2008 financial crisis.

Meredith Whitney attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail), and the head of financial institutions research for Wachovia Securities Inc.

Jonathan F. Foster was a managing director at Wachovia Securities Inc., and a senior managing director at Bear Stearns Companies Inc.

Bear Stearns Companies Inc. was a recipient for the Bailout - Bear Stearns bridge loan, a borrower for the Bailout - Primary Dealer Credit, and a borrower for the Bailout - Term Securities Lending.

JPMorgan Chase & Co. acquired the Bear Stearns Companies Inc.

Andrew Ross Sorkin is the author of Too Big to Fail.

HBO purchased the movie rights to the Too Big to Fail (2011).

Quentin Schaffer is the EVP for HBO, and a governor for the Roosevelt Institute.

Foundation to Promote Open Society was a funder for the Roosevelt Institute., and the Brookings Institution (think tank).

George Soros was the chairman for the Foundation to Promote Open Society.

Cyrus F. Freidheim Jr. is an honorary trustee at the Brookings Institution (think tank), and a member of the Commercial Club of Chicago.

Rahm I. Emanuel is a member of the Commercial Club of Chicago, the Chicago (IL) mayor, Ari Emanuel’s brother, and was the White House chief of staff for the Barack Obama administration.

Ari Emanuel is Rahm I. Emanuel’s brother, and the co-CEO & director for William Morris Endeavor Entertainment.

Maria Bartiromo is a William Morris Endeavor Entertainment client, and attended Andrew Ross Sorkin’s 2009 book party (Too Big to Fail).

Paul Giamatti is a William Morris Endeavor Entertainment client, and an actor in Too Big to Fail (2011).

Topher Grace is a William Morris Endeavor Entertainment client, and an actor in Too Big to Fail (2011).

William Hurt is a William Morris Endeavor Entertainment client, and an actor in Too Big to Fail (2011).

R. Eden Martin is the president of the Commercial Club of Chicago, and counsel at Sidley Austin LLP.

Michelle Obama was a lawyer at Sidley Austin LLP.

Barack Obama was an intern at Sidley Austin LLP.           

Newton N. Minow is a senior counsel at Sidley Austin LLP, and a member of the Commercial Club of Chicago.

Valerie B. Jarrett is a member of the Commercial Club of Chicago, the senior adviser for the Barack Obama administration, and her great uncle is Vernon E. Jordan Jr.

Vernon E. Jordan Jr. is Valerie B. Jarrett’s great uncle, an honorary trustee at the Brookings Institution (think tank), a director at the American Friends of Bilderberg (think tank), a senior counsel for Akin, Gump, Strauss, Hauer & Feld, LLP, and a 2008 Bilderberg conference participant (think tank).

Akin, Gump, Strauss, Hauer & Feld, LLP is the lobby firm for KKR & Co. LP.

John M. Keane was a senior adviser for KKR & Co. LP, is a friend of David H. Petraeus, and a director at MetLife, Inc.