WASHINGTON, D.C.— Dennis Kelleher, President, CEO and Co-founder of Better Markets, issued the following statement in connection with the Federal Reserve’s announcement today of plans to weaken stress tests.

“Showing disrespect if not disdain for the public, the Federal Reserve’s announcement today at 4PM on the day before Christmas and Hanukkah eve should be beneath the dignity of the Fed. Unfortunately, this stunt of trying to bury important news by releasing it late on Fridays or holidays is standard operating procedure for the Fed seeking to minimize media coverage and public awareness when engaging in questionable conduct that might not withstand the scrutiny of the light of day.

“It’s no surprise that the Fed would seek as little transparency and public attention to its latest regulatory announcement because it appears to be a capitulation to the demands of Wall Street’s biggest banks for materially weakening the stress test regime. Stress tests have been the crown jewel of financial regulation since they stopped the freefall of the stock market and collapse of the financial system in early 2009.  They have also been the cornerstone of making the banks less likely to crash by requiring them to have more loss absorbing capital, which is all that protects taxpayers from bailing them out when their recklessness causes crashes.

“It is pure propaganda for the Fed to include in its announcement that capital levels ‘have more than doubled’ and increased ‘more than $1 trillion’ in the last 15 years without mentioning that those levels were so dangerously low 15 years ago that the US suffered the worst financial crash since 1929 and those banks required trillions of dollars in bailouts, more than $700 billion from taxpayers and trillions more from the Fed itself.  The Fed knows that the adequacy of capital is not based on its lowest levels in 100 years, but the level needed to protect the American people now, the very people the Fed seeks to keep in the dark by its holiday announcement.

“Adding insult to injury, while stating that the Fed will ‘soon seek public comment’ on the proposed changes, the announcement leaves little doubt that process will be a charade, and that the outcome is preordained. The Fed all but stated it intends to give the Wall Street banks the keys to the stress tests, almost certainly making them largely predictable, highly gameable, and very favorable.  Main Street Americans will once again likely pay the price for the Fed’s latest bank friendly actions, which is what happened when the Fed bowed to the financial industry in the years before the 2008 crash.”

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