We’ve been beating the drum against crony capitalism for a good while now. Veronique DeRugy, the author of the attached article, has been doing it longer than we have. We encourage you to read her whenever you stumble across her work.
Interestingly MetLife didn’t want the “too big to fail” designation in contrast to many other large financial institutions which have made a deal with the devil under Dodd-Frank.
(From The National Review)
Too big to fail or its Dodd-Frank almost equivalent, SIFI, implicitly put taxpayers on the hook for bailing out companies while at the same time giving these companies incentives to take more risks by enjoying the tremendous advantages such as the ability to borrow artificially cheaply thanks to the implicit federal guarantee. It also creates a sense that shareholders are protected from downside risk should the company get in trouble.
In spite of the very large compliance costs that comes with the protection, most companies enjoy the benefits. But not all. In this case, insurance company MetLife wanted out. Interestingly, Eugene Scalia, the son of the late Justice Antonin Scalia, crafted the MetLife challenge.