Court’s rebuke to FSOC was well-deserved
Patrick Jenkins, in “MetLife ruling poses threat to drive towards global financial stability” (Inside Business, April 5), says that the court’s decision in the MetLife case is “a rebuke” to the Financial Stability Oversight Council. So it is, and a well-deserved one.
Mr. Jenkins’ agonizing over the decision suggests that bureaucratic agencies should be given unchecked powers because he believes they know how to recognize and control systemic risk. For this belief, there is no evidence, and a lot of evidence to the contrary. The bureaucratic bodies concerned all failed to foresee the housing and sovereign-debt crises of this century and failed to foresee the more recent oil-price collapse.
Their record in the 1990s, 1980s and 1970s is equally bad. A fundamental weakness they cannot overcome is that governments themselves are major creators of systemic risk. This cannot be controlled by a committee of government appointees — especially one chaired by a principal political officer, the secretary of the Treasury. What the FSOC does have is a strong urge to extend its control over private institutions by its own diktat. This should not be allowed in a democratic system of checks and balances.
The bureaucratic will-to-power is the real core of the Dodd-Frank Act, which is best understood as the Faith in Bureaucracy Act.
