We recently learned that all 23 banks that were subject to the Federal Reserve's 2021 stress tests passed with flying colors. In this Fool Live video clip, recorded on June 28, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser discuss why this year's results could be especially important for investors to pay attention to. 

Jason Moser: Let's go ahead, just get to really what is the lead story I think for the week. You and I both agreed it's the latest round of stress tests. I thought this was interesting from a number of different angles, but first and foremost, it appears like all U.S. banks, all big banks here, domestically, are in pretty good shape now. Given the purpose that these stress tests serve, I think we can all get behind why they exist. It sounds like all 23 banks here are, according to the Federal Reserve, in pretty good shape if we run into another economic downturn.

Matt Frankel: In a lot of ways, I feel like this was less of a headline than it has been in years past, because when you think about it, banks just went through an actual stress test.

Moser: True.

Frankel: At the beginning of the COVID pandemic, banks plunged more than most kinds of stocks in the market. And the reason was, people didn't know if they could handle that kind of stress, because the stress test the Fed puts them through was a lot milder in a lot of ways than what the COVID pandemic put them through. For example, the stress test that you just used projected a 55% drop in the stock market, which was a little more than the S&P had. But it projected a peak unemployment rate of 10.8%. At the peak of COVID, we had an unemployment rate that was more than that. Banks were just through a stress test. It wasn't too surprising, but this was definitely good news that all 23 institutions that were subject to the stress test -- remember, it's only the biggest ones that have to do it -- passed with flying colors. Minimum capital levels would've stayed more than double the regulatory minimums even in that severe downturn. That's pretty impressive. They would collectively lose almost half a trillion dollars, so the stock prices would probably go down if that were to happen. But the banks would survive, and that's really the important part. The reason for these regulations isn't to protect the stockholders, it's to protect the American public from bank failures.

Moser: Yeah. I'm glad you made that point, because I'm sure there are varying opinions on this -- too much regulation versus not enough regulation. But it really does seem like this comes from the right place. It does come from a place where it's trying to make sure, essentially, our entire system doesn't just collapse, given how crucial a role all of these lenders play in our entire economy. It's very easy, I think, for consumers just to think, "Oh, that's the bank that charged me those overdraft fees, and they're trying to rip me off, and they charge me for my account, monthly or whatever." Maybe there's a little bit of a different perception there versus -- I mean, you and I know,  many of us know, how these banks make their money in lending. The more money they lend out, the more exposure that is. You run into an economic downturn, all of a sudden, the dots become a little bit more connected, it becomes a little bit more apparent, and it certainly seems to me like these stress tests, this comes from a good place.

Frankel: A lot of my 20-somethings and early 30s investors might not remember: Before these stress tests existed in 2008, 2009, there was a legitimate chance that the financial system would have collapsed...

Moser: I felt that way too -- a lot of us, I think.

Frankel: ...without the big banking bailout. And they don't want the need for future bailouts of these banks either. It's a really necessary piece of the puzzle. The stress tests are getting a little more flexible over time, and that's one thing I want to talk about in a minute. But in general, this is a good thing for consumers, for the market in general, because the COVID pandemic was tougher on the economy in a lot of ways than the financial crisis was. The financial crisis didn't make the economy grind to a halt. At the time, I was still a grad student. I was working at a restaurant. The restaurant stayed open. The college was still open. People were still going out to eat. It wasn't as devastating of an economic event as the COVID pandemic was. A lot of it was due to the stimulus, is why the banks handled it so well. But a lot of it has to be attributed to these stress tests, and just the increased regulation and increased oversight when it comes to how much capital these banks have to keep, because before, it really wasn't there.