Finance

Federal Reserve’s Watered-Down Stress Tests Signal Complacency on Banking Risks

By Economics Desk | June 28, 2025

This year’s Federal Reserve stress tests gave all major banks a clean bill of health—but only after significantly lowering the economic severity scenarios, omitting critical risks like private credit exposure, and reducing scrutiny overall. Such softened testing raises alarming questions about the Fed’s true commitment to safeguarding American taxpayers from another banking crisis.

The Federal Reserve recently announced that all 22 major banks passed its annual stress tests with flying colors. On the surface, this sounds reassuring. But a deeper look at the details reveals a troubling retreat from rigorous oversight that could leave our financial system dangerously exposed.The Fed’s stress tests were established in response to the 2008 financial meltdown—an event rooted in lax regulation and unchecked risk-taking by "too big to fail" institutions. These tests are supposed to simulate harsh economic shocks to ensure banks have enough capital to withstand real crises without jeopardizing everyday Americans’ savings and livelihoods.Yet this year’s...

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