The markets were generally pleased with the release of the Fed’s annual bank stress tests late Wednesday. All of the 23 large banks easily passed their respective stress tests. However, the stress tests were conducted only on the largest U.S. banks, and not on mid-sized and smaller U.S. banks.
Fed Chair Powell today said that the U.S. banking system is “strong and resilient.” However, Mr. Powell neglected to mention that the U.S. banking system is “strong and resilient” only because the U.S. government in March was forced to guarantee deposits held by corporations and individuals above the FDIC limits in response to the run on mid-sized U.S. regional banks. He also neglected to mention the three large regional banks that failed earlier this year, including Silicon Valley Bank, First Republic, and Signature Bank.
