The MetLife building in New York on Jan. 31, 2005.Chip East
Shaking a financial watchdog is no easy feat.
MetLife has been trying to do so for nine months, yet still has the Federal Reserve's teeth sunk into it. It's now taking a different breed of regulator for a walk in a case that epitomizes the folly of U.S. bank regulation.
Back in December, the U.S. insurer with $825-billion (U.S.) of assets struck a deal to sell a business to General Electric.
The relatively small size belied its bigger implications.
Unloading $7-billion of deposits would free MetLife from Fed oversight.
The urgency became evident in March when the company failed the agency's stress test, which prevents the return of cash to shareholders.
As originally structured, the sale to GE Capital's commercial banking division required a nod from the Federal Deposit Insurance Corp.
Yet, the regulator, which is still operating with an acting chairman, failed to take any action after eight months.
Last week, the two companies revamped the deal in a way that could speed things along.
GE Capital's retail bank will now be the buyer. The switcheroo means the FDIC is out and the Office of the Comptroller of the Currency steps in as the one to give approval.
It's not obvious why the FDIC hadn't signed off.
It could be a simple case of bureaucratic red tape rather than anything worrisome about insuring deposits sitting with GE.
Even if it's a benign case of regulatory arbitrage, however, it's a stark reminder that large financial institutions still have room to shop around for more favourable treatment among a multitude of overlapping overseers.
It's hardly reassuring in the post-Office of Thrift Supervision age. The agency was the only one eliminated after its pre-crisis failings supervising the likes of American International Group and Washington Mutual. The irony for MetLife is that even if the sale to GE goes through, the insurer would still potentially be big enough to be classified a systemically important institution. That would mean it would remain under the Fed's paw.