“The Federal Reserve Board should refrain from weakening the stress testing framework and vigorously defend its clear legality in court.”

“The changes sought by big banks…will come back to haunt families, small businesses, and the economy, increasing the likelihood of another Wall Street-driven economic collapse.”

PDF of the Letter

Congresswoman Maxine Waters (D-CA), Ranking Member of the House Committee on Financial Services, and U.S. Senator Elizabeth Warren (D-MA), Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs (BHUA), wrote to Federal Reserve (Fed) Chair Jerome Powell, questioning why the Fed plans to weaken banking rules by upending the stress testing framework used to ensure that banks are prepared for financial and economic shocks and downturns. 

“The changes sought by big banks - like previous rollbacks of banking rules - will come back to haunt families, small businesses, and the economy, increasing the likelihood of another Wall Street-driven economic collapse,” warned Ranking Members Waters and Warren. 

Stress testing was a key tool that regulators deployed to restore confidence in the financial system in the wake of the 2008 economic crisis, and the Dodd-Frank Act requires annual stress tests of the nation’s largest banks and other systemically important institutions.

In December 2024, several big bank lobbying organizations sued the Federal Reserve Board over its stress testing framework. In advance of the lawsuit, the Fed released an announcement indicating that, “In view of the evolving legal landscape, the Federal Reserve Board will soon seek public comment on significant changes to improve the transparency of its bank stress tests and to reduce the volatility of resulting capital buffer requirements.”

“We are concerned that, instead of fighting against the banks in courts and elsewhere, the Fed is now – in the wake of President Trump’s election – seeking new avenues for premature surrender,” said Ranking Members Waters and Warren. “This announcement makes it clear the Federal Reserve Board intends to voluntarily oblige big banks and initiate a rulemaking to undermine the stress tests. This posture directly conflicts with previous statements you have made to the Banking Committee.”

In order to better understand the serious implications of the December 2024 announcement, Senator Warren and Congresswoman Waters asked Chairman Powell to respond to their questions by February 24, 2025.

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