The Federal Reserve approved an overhaul of its annual bank stress tests today.

The new system makes those tests more transparent and makes the amount of capital banks must hold more predictable.

But some Democrats have criticized the move because they are concerned it weakens important safeguards against another financial crisis.

And they are right to some extent.

Banks should have a cushion.

We learned that lesson painfully during the 2008 financial crisis.

The Fed’s tests are designed to make sure banks have enough capital to survive a severe recession or financial crisis.

But there is another side to the equation that many Democrats don’t always think about.

Banks are one of the easiest ways to move money from people who have capital to people who can put that capital to productive use.

And America should be thinking about ways to use its banks to help solve issues like healthcare, infrastructure, and small business development.

A strong bank that lends money into the real economy can be an enormous asset.

We saw that model during the response to COVID.

The federal government created the programs, but banks and other lenders helped move hundreds of billions of dollars to businesses across the country.

In other words, the government used financial infrastructure that already existed.

So, while we should take our banks’ capital strength seriously, the answer cannot simply be to make regulations as difficult as possible.

The goal should be to make sure banks are safe and then position them to help America move capital quickly and efficiently.

The banks were an asset to us during the COVID crisis, and we should be thinking about how to use them to solve our problems in the future.