Help me, I’m confused. Everyone knows that big banks have an unassailable competitive advantage as a result of the implicit government guarantee they enjoy by virtue of being too big to fail. That’s supposed to make them unbeatable, right? Big-bank managements can thus take on crazy risks, confident that if things go right, they’ll get big-time paychecks, but if they go wrong, Uncle Sam will step in and save the day. It’s a sweet deal. What executive wouldn’t want one? Well, apparently Steven Kandarian, the CEO of MetLife:
(Reuters) – MetLife Inc (MET), the largest U.S. life insurer, is not a systemically important financial institution whose failure could pose a threat to the nation’s financial stability, Chief Executive Steven Kandarian said.
Kandarian’s comments late on Tuesday came after the U.S. financial risk council moved closer to designating MetLife as systemically risky.
He said in a statement MetLife was notified by the Financial Stability Oversight Council (FSOC) that it had reached “Stage 3″ in the process to determine whether the insurer would be named a non-bank Systemically Important Financial Institution (SIFI). . . .
“Not only does exposure to MetLife not threaten the financial system, but I cannot think of a single firm that would be threatened by its exposure to MetLife,” Kandarian said. [Emph. added]
Has no one told Kandarian about MetLife’s unfair advantage? Does he not read Simon Johnson? Granted, the company is an insurer rather than a bank, but that implicit government guarantee that has the bank-bashers grousing so ought to count for something even in the life insurance business. One would think that MetLife would be jumping at the chance to be designated a SIFI.
But it’s not-and for good reason. MetLife’s objections are telling. For in fact, the supposed funding advantage conferred by the government’s implicit subsidy doesn’t show up in the numbers, even as the extra regulatory burden that goes with being a SIFI is very real and very expensive. MetLife’s resistance to being dubbed a SIFI is strong evidence that the bank-bashers’ gripes about the government guarantee big banks enjoy are way overdone, if not outright mistaken. There may be good reasons for breaking up the big banks (actually, there aren’t), but doing away with supposed unfair guarantees isn’t one of them.
What do you think? Let me know!