Warren, Waters Call Out Fed For Gutting Wall Street Stress Tests, Including Giving Banks the Answer Key

Warren, Waters Call Out Fed For Gutting Wall Street Stress Tests, Including Giving Banks the Answer Key

"In Trump's second term, the Fed has once again taken an axe to the stress testing framework."

Text of Letter (PDF)

Washington, D.C. - Today, U.S. Senator Elizabeth Warren (D-Mass.), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, and Congresswoman Maxine Waters (CA-43), Ranking Member of the House Financial Services Committee, sent a letter to Michelle Bowman, Vice Chair for Supervision of the Federal Reserve (Fed), urging the Fed to immediately rescind its dangerous stress testing proposals and do a complete overhaul of its internal stress testing models in advance of the 2027 stress tests.

"Wall Street has long sought to weaken the Fed's stress tests in order to reduce their loss-absorbing capital cushions through higher dividends and share buybacks. In October 2025, the Fed yet again delivered for big banks-including by publicizing, in the form of a proposed rule, its internal models; proposing changes to weaken those models; and proposing to allow banks to help shape the economic scenarios used in the stress tests. In other words, the Fed is allowing banks to choose the questions designed to assess their resilience to economic shocks and is then providing them with the answer key,"wrote the Ranking Members.

The Ranking Members concluded: "(T)he Fed notes that its proposed stress test changes will reduce megabank capital requirements… (B)anks would look stronger following shock events without doing anything to actually minimize their risks and they would be in a worse financial position to deal with those risks. The Fed's proposal would reduce capital cushions at the riskiest banks by (more) than $35 billion - that's billions of dollars that could be diverted directly to shareholders and stock repurchases, and billions less to absorb losses during periods of economic turbulence."

The Senators request written responses detailing the Fed's recently released stress testing proposal and its implications for the stability of America's financial system no later than May 12, 2026.

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