(Bloomberg) -- A U.S. lawyer defending the government’s decisionto designate MetLife Inc. a threat to the Americaneconomy if it were to falter was questioned sharply by a federaljudge who was asked by the company to remove the label.

The nation’s biggest life insurance company is one of fourcompanies tagged as a systemically important financial institutionby the Financial Stability Oversight Council.

The designation means it may be subject to tougher capital andleverage requirements.

Read: MetLife introduces QLAC to 401(k)market

The agency on Wednesday asked U.S. District Judge RosemaryCollyer in Washington to throw out the insurer’s 2015 lawsuit,which contends the FSOC designation was arbitrary andunjustified.

The suit by New York-based MetLife is the biggest challenge yetto the regulatory council led by Treasury Secretary Jacob Lew sinceits creation as part of the 2010 Dodd-Frank law meant to reduce thechances of future financial crises.

Collyer asked Justice Department lawyer Eric Beckenhauer why theFSOC seemed to proceed from the proposition that in a fiscalcrisis, MetLife would be at the brink of collapse.

‘Assuming the worst’

“That’s not risk analysis,” she said. “That’s assuming the worstof the worst of the worst.”

Beckenhauer responded that it’s the nature of financial crisesto be unanticipated.

He said the insurance company was asking her to override the“considered judgment” of the heads of nine major financialregulators.

Collyer also queried MetLife lawyer Eugene Scalia about the lowbar set for FSOC’s identification of potential threats to thefinancial system, noting that the threshold was merely that itcould pose a threat, not that it did.

Scalia said his client isn’t a financial institution that shouldbe subject to FSOC and that, even if it were, the methods used bythe council to arrive at its conclusions violated federaladministrative procedure law and the company’s right to dueprocess.

‘Clouded in mystery’

The designation process, he said, was “clouded in mystery.”

MetLife has said the FSOC relied on “unsubstantiatedspeculation” and that the insurer poses no risk to the financialsystem. The three other nonbank financial companies designated byFSOC as systemically important are insurers American InternationalGroup Inc., Prudential Financial Inc. and General Electric Co.’sfinance unit.

GE, which is exiting most of its lending businesses, has said itwill ask the FSOC to remove the systemically important label fromGE Capital.

MetLife is the only institution bearing the too-big-to-faillabel to go to court over the determination.

The case is MetLife Inc. v. Financial Stability OversightCouncil, 15-cv-00045, U.S. District Court, District of Columbia(Washington).

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