Back in April I blogged about the district court decision in MetLife v. Financial Stability Oversight Council. There, Judge Rosemary Collyer (D.D.C.) sent waves through the financial services industry and among scholars of cost-benefit analysis. Relying in part on the Supreme Court’s decision last year in Michigan v. EPA, the district court held that the Financial Stability Oversight Council (FSOC) violated the Administrative Procedure Act by not considering the costs of designating MetLife as a non-bank systemically important financial institution (SIFI) where Dodd Frank commanded the agency to consider “appropriate” risk-related factors.
The case is now being briefed before the D.C. Circuit, and I thought I’d flag for readers an amicus brief that was filed last month by a couple dozen law professors, led by Michael Barr, Gillian Metzger, and Robert Jackson, Jr. You can download the brief here. And here is a snippet from the summary of the argument (at 4-5):
The District Court’s decision is fundamentally flawed and, if affirmed, will significantly undermine Dodd–Frank’s protections against a future financial crisis. First, the District Court’s requirement that FSOC assess the costs of designating MetLife a SIFI ignores both the text of the statute and Congress’s policy choices. None of the ten mandatory factors that Dodd–Frank requires the FSOC to consider in making a SIFI determination makes any reference to regulatory costs. The statute’s catch-all language granting the FSOC authority to consider “any other risk-related factors [the FSOC] deems appropriate,” 12 U.S.C. § 5323(a)(2)(K) (2012), represents a broad grant of discretion to the agency and offers no basis for the District Court’s requirement that the FSOC consider costs. Moreover, Michigan v. EPA involved a dramatically different statutory provision and emphasized the importance of attending to statutory language; it therefore offers no support for the District Court’s view. By latching onto the single word “appropriate” and ignoring both legislative text and Congress’s policy choices, the District Court failed to heed the Supreme Court’s recent insistence that courts must read statutory words in context with “a fair understanding of the legislative plan.” King v. Burwell, 135 S. Ct. 2480, 2496 (2015).
Second, the District Court required a degree of precision in assessing the systemic effects of MetLife’s distress that is impossible for the FSOC to meet and completely implausible as a matter of statutory text and legislative intent. The FSOC’s designation of MetLife also reflected a reasonable interpretation of its regulatory guidance on the SIFI designation process (the “Guidance”)—an interpretation to which the District Court failed to defer. The District Court’s contrary reading of the Guidance would require the FSOC to ignore relevant statutory factors regarding both vulnerability to distress and its effects. It also reveals a lack of understanding of basic principles of financial regulation and the core purposes underlying designation. And the District Court’s suggestion that the Guidance became a legislative rule because the FSOC subjected it to notice and comment is irreconcilable with the Administrative Procedure Act (APA) and recent Supreme Court precedent.