(The Epoch Times)—All 22 of the largest U.S. banks have passed the Federal Reserve’s latest annual stress test, demonstrating their ability to withstand a hypothetical financial crisis and paving the way for potential increases in shareholder payouts.
In results released on June 27, the Fed said that under a “severely adverse” scenario—including a sharp global recession and surging unemployment to 10 percent—the banks would collectively suffer losses exceeding $550 billion. Despite such a heavy hit, their core capital buffers—measured by the common equity tier 1 capital ratio (CET1)—would fall by only 1.8 percentage points and still remain well above regulatory minimums.
On average, banks maintained a CET1 capital ratio of 11.6 percent, comfortably higher than the 4.5 percent regulatory floor. This capital ratio is critical because it acts as a cushion to absorb losses during severe downturns.
“Large banks remain well capitalized and resilient to a range of severe outcomes,” the Fed’s Vice Chair for Supervision, Michelle Bowman, said in a statement.
This year’s stress test scenario envisioned a steep global recession, featuring a 30 percent drop in commercial real estate prices, a 33 percent decline in house prices, and a nearly 6 percentage point spike in the unemployment rate to a peak of 10 percent. Economic output was projected to contract sharply under these conditions, which also assumed significant financial market turmoil, including a 50 percent plunge in equity prices and a sharp selloff in corporate bonds, with spreads on investment-grade debt widening to 5 percent.
Among the projected losses in this year’s stress test, credit card losses accounted for $157 billion, while losses on commercial and industrial loans totaled $124 billion, and commercial real estate loan losses reached $52 billion.
The stress test results play a critical role in determining the minimum capital levels banks must hold relative to their risk-weighted assets, serving as a key safeguard for financial stability. Many banks typically announce dividend plans and share buybacks shortly after the release of stress test results.
While severe, this year’s stress test scenario was somewhat less seismic than the 2024 version. This reflects the countercyclical design of the Fed’s stress testing framework, which becomes harsher during periods of economic growth and eases slightly when the economy is already under strain. The Fed also noted that year-to-year volatility in stress test results has been driven by model sensitivities and other factors, leading to fluctuations in projected capital requirements.
To address these fluctuations, the Fed is considering a rule that would average stress test results over two consecutive years. According to Bowman, this change aims to reduce “excessive volatility” and provide a more stable and reliable gauge of banks’ capital adequacy.
The proposed rule, which also includes easing regulatory reporting requirements, comes as the Trump administration pursues efforts to reduce regulatory burdens in support of economic growth and investment.
As part of this broader push, the Fed and other federal banking regulators announced plans this week to revise the enhanced supplementary leverage ratio, a key post-crisis safeguard that requires the largest global banks to hold capital against all assets, regardless of risk.
At a public board meeting on June 25, Fed governors voted 5–2 to advance a plan to replace the existing flat leverage buffer—which stands at 2 percent at the parent company level and 6 percent at the subsidiary level—with a variable buffer tied to each bank’s systemic risk score. The goal is to reduce regulatory disincentives for holding low-risk assets like U.S. Treasurys and to ensure banks can function effectively as intermediaries in the Treasury market, especially during periods of market stress when liquidity is vital.
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Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.
