WASHINGTON, D.C.— Dennis Kelleher, Co-founder, President and CEO, issued the following statement on the Federal Reserve’s (Fed) release of the 2025 stress test results:
“Today’s announcement of yet another year when 100% of largest U.S. banks passed the Fed’s annual stress tests should alarm, not comfort, every American. This marks the 11th year in a row when 100% of the most complex and dangerous Wall Street banks have all passed the annual stress tests. This proves that these annual exercises are little more than stressless stress tests that fail to properly and adequately assess the risks of these megabanks. Because stress test results determine how much capital a bank must have, stress tests have been transformed from an important protection for Main Street Americans into a capital ejection mechanism to enrich shareholders and bank CEOs.
“The only thing standing between a failing bank, a financial crisis, a taxpayer bailout, and economic and human catastrophe is bank capital. If a bank has enough capital to absorb its own losses, then it won’t fail, cause a crisis, or require a bailout, which is nothing more than taxpayers providing the capital after a crash that a bank should have had to prevent the crash in the first place. Banks having adequate capital would have prevented the 2008 crash and 2023 banking crisis, and having enough capital now will prevent future crashes. Unfortunately, stressless stress tests will enable banks to have less capital than they need to avoid future failures, crashes, and bailouts.
“Remarkably, a 100% pass rate year-after-year for 11 years still isn’t enough for the banking industry, its lobbyists and political allies. They are demanding that the Fed actually weaken the stress tests further by revealing to the banks the details of the test before they take it. As everyone knows, if you provide the answers to a test before it is taken, the test is worthless, but the Fed is nonetheless going to do this.
“This will give the industry the ability to game the tests and guarantee they will pass with flying colors. This will enable those banks to pay out more capital to shareholders and increase executive bonuses, rather than requiring banks to have enough capital to absorb their own losses and protect Main Street Americans, the financial system, and the economy from future bank failures and bailouts. The stress test results are supposed to establish the minimum capital levels to achieve that protection, but instead the banking industry has turned those into the maximum levels. Letting banks have minimum levels of capital is an extremely high-risk proposition, especially because it is based on regulators guessing what future stress scenarios might be and how those stresses will play out in the future. Given that the Fed and other banking regulators have repeatedly proved their incompetence in doing this, in 2008 and 2023 most recently, this is beyond irresponsible.
“The stress tests were the gold standard of financial regulation for sensibly assessing banks’ ability to withstand real stress and have adequate capital to protect the bank, the financial system, and the economy. That’s what happened in March of 2009, which restored confidence and trust in the banking system in the wake of the 2008 crash. The Fed is now throwing all that away and its own credibility just to appease the banks and their allies, and to enrich their executives. This is a dereliction of duty to the American people and history is going to judge the Fed and the Governors very harshly for these actions.”
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Better Markets is a non-profit, non-partisan, and independent organization founded to promote the public interest in the financial markets, support the financial reform of Wall Street and make our financial system work for all Americans again. Better Markets works with allies—including many in finance—to promote pro-market, pro-business and pro-growth policies that help build a stronger, safer financial system that protects and promotes Americans’ jobs, savings, retirements and more. To learn more, visit www.bettermarkets.org.
