America's Biggest Banks Lock Horns with the Fed Over Stress Tests

The Full Breakdown:

According to reports, America’s largest banks—including Citigroup, Goldman Sachs, and JPMorgan—are planning to sue the Federal Reserve this week over its annual stress tests. These so-called “tests” determine how much capital banks must keep in reserve, supposedly to ensure they can meet their obligations in a crisis. They also dictate how much these banks can funnel back to shareholders through stock buybacks and dividend payouts.

But let’s be honest: these tests are little more than a dog-and-pony show. Banks pass them every year, even the ones teetering on insolvency (looking at you, California banks). Meanwhile, the Fed uses these tests as a stick to beat smaller competitors out of the market while letting the “too big to fail” crowd off with a wink and a nudge.

Why the Fed is Feeling the Heat

This lawsuit comes hot on the heels of the Fed’s announcement that it’s mulling “major changes” to its stress testing process. They’re even asking for public comment, claiming it’s all about improving transparency and reducing volatility in capital requirements.

Transparency? From the Fed? That’s rich. They’re only making changes because they’re under legal pressure, with groups like the Bank Policy Institute (BPI) accusing them of violating administrative law by keeping their supervisory models and stress scenarios secret.

Greg Baer, CEO of the BPI, is cautiously optimistic, calling the Fed’s announcement “a first step towards transparency and accountability.” But don’t pop the champagne just yet. Baer also hinted that the banks are ready to take “additional options” to ensure meaningful reform—like, say, suing the pants off the Fed.

The Hidden Agenda

Let’s cut through the noise. The Fed doesn’t exist to protect the economy or the average American. It was created by big banks, for big banks, to crush competition and consolidate power. Stress tests? Just another tool in their arsenal to enforce the illusion of oversight while keeping the system stacked in their favor.

Think about it: the Fed’s tests are designed to maintain the status quo, ensuring the largest players can weather storms while smaller banks get swept away. And when those storms hit, guess who gets the bailout? Not you. Not the mom-and-pop credit unions. Just the megabanks—the same ones suing the Fed now for cramping their style.

As one sharp observer on Twitter put it:

“The Fed’s reason for existence is to protect the big banks. That is their one and only mandate. The Fed was created by big banks for that purpose, under the guise of protecting us.”

Couldn’t have said it better myself.

The Real Cost

While the banks and the Fed duke it out, the fallout lands squarely on the rest of us. These stress tests are just one piece of a rigged system that prioritizes corporate profits over economic stability. Higher capital requirements might curb bank lending, sure, but loosening them only fuels risky behavior—behavior that led to the 2008 crash in the first place.

It’s a lose-lose for the public. If the Fed caves, the banks get more leeway to gamble with your money. If the Fed digs in, the banks will just pass the costs onto you through higher fees, stricter loan terms, or both.

Call to Action:

The Fed and the big banks want you distracted, compliant, and broke. Don’t fall for it. Take control of your financial future before their games cost you everything. Download “Seven Steps to Protect Yourself from Bank Failure” by Bill Brocius today. Click here to get your free guide.

Stay skeptical. Stay prepared. And above all, stay free.