There’s a new sheriff of Wall Street in town, with the power to overrule the Treasury Department, Federal Reserve, and all the other banking regulators. She can determine to impose or withdraw oversight of financial institutions, and analyze whether financial regulations make sense for the overall economy.



The only problem is that nobody elected her or charged her with that duty.

Our new super-regulator is named Rosemary Collyer. She’s a George W. Bush-appointed federal district court judge in Washington, D.C. Last week she announced that insurance giant MetLife should not be subject to enhanced supervision and larger capital requirements imposed by the Financial Stability Oversight Council (FSOC), a group of regulators tasked under Dodd-Frank with monitoring the overall financial system. MetLife sued to overturn FSOC’s ruling designating it a systemically important financial institution (SIFI) and subjecting it to stronger regulations along with three other non-bank institutions (AIG, Prudential, and GE Capital). All of those designations are now threatened by Judge Collyer’s MetLife opinion, as this opens them up to legal challenge.

Collyer didn’t release her reasoning for why MetLife should be let off the hook until yesterday. The opinion reveals a textbook example of judicial activism, with a federal magistrate inserting her judgment in place of the entire U.S. financial regulatory apparatus. But it also reveals a weakness of laws like Dodd-Frank, which relinquish discretion to regulators to set the rules rather than defining them rigidly. This inherently subjective approach always falls victim to conflicting opinions, and the resulting chaos can open our economic system to unnecessary risk.

In her 33-page opinion, Judge Collyer states that when FSOC designated MetLife as systemically important, it “focused exclusively on the presumed benefits of its designation and ignored the attendant costs” to MetLife. But FSOC was not statutorily required to perform a cost-benefit analysis. Their role is to determine which financial institutions present a risk to the financial stability of the United States, not whether that creates costs that outweigh benefits.