By Hester Peirce, includes “The Financial Stability Oversight Council is rumored to be on the verge of designating MetLife as a systemically important financial institution. Through the FSOC's bureaucratic eyes, designating MetLife may appear to be a safer course than leaving it undesignated and facing questions later if the company runs into trouble. But designation brings its own problems-problems that are likely to be ignored in the FSOC's broken designation process. Thanks to Dodd-Frank, regulators are fully engaged in the business of picking out and propping up individual firms. Dodd-Frank gives the FSOC authority to require the Federal Reserve to supervise "nonbank financial companies that may pose risks to the financial stability of the United States in the event of their material financial distress or failure, or because of their activities." Once the Fed takes these firms on, for reputational reasons, it will not spare any expense or regulatory tricks to prop them up. The trade-off, of course, is that the Fed will employ the same helicopter parenting style for these firms that it uses for the big banks it oversees. …”
Read the full article on: Mercatus Center, George Mason University