It appears that Jamie Dimon is wishing Jay Powell a Merry Christmas by serving him with some papers.
After years of grumbling, Wall Street is taking the gloves off. On Tuesday, major banks and business groups sued the Federal Reserve, accusing it of overstepping its authority with opaque and legally questionable stress tests. Led by the Bank Policy Institute, U.S. Chamber of Commerce, and American Bank Association, the lawsuit takes aim at the Fed’s hypothetical economic doomsday scenarios and the capital requirements they generate.
The banks have been arguing for a while that the Fed’s confidential models and methodologies violate proper administrative procedures. While the Dodd-Frank Act requires stress tests, banks say there’s no legal mandate for the Fed’s capital adequacy rules. Wall Street wants transparency and public feedback on the testing process without scrapping it altogether.
The timing isn’t random. Recent Supreme Court rulings, particularly the dismantling of the Chevron doctrine, have clipped regulatory wings, emboldening industries to challenge agency powers. The Fed announced plans to revamp stress tests for 2025, but banks are pressing ahead, claiming the current process is arbitrary and unaccountable.
For years, stress tests have dictated everything from capital reserves to the size of dividend payouts and stock buybacks. While the Fed defends its opacity as necessary to maintain the integrity of the tests, Wall Street has had enough.
At its core, this lawsuit is a power struggle. After a decade of Dodd-Frank-induced headaches, JPMorgan CEO Dimon and his peers are finally saying, “Show us the math.” Whether the courts will agree remains to be seen, but the era of Wall Street tiptoeing around its regulators might officially be over.