The Wall Street Journal (pay site) posted a story on its web site last Friday, May 8, after the markets closed. The headline was "Banks Won Concessions on Tests," with the subhed, "Fed Cut Billions Off Some Initial Capital-Shortfall Estimates; Tempers Flare at Wells." That being Wells Fargo.
There were numbers attached to the piece, the most brow-raising one associated with CitiGroup which, according to the Journal's reporting, started out at the beginning of the government-administered stress test needing $35 billion in additional capital, and ended up being asked to raise just $5.5 billion. Wells Fargo's shortfall got reduced from $17.3 billion to $13.7 billion. The Journal reported some grumblings from the banks' high-level executives:

And this quote—"we agreed with the number"—suggests more about the provision of these stress tests than had as yet been leaked out publicly. It suggests a sort of scenario like this:


Imagine you're a smoker, and a drinker, plus you have a little cocaine habit. Also, you're 70 pounds overweight. Picture yourself at, say 62 years of age, having suffered a massive coronary and double-bypass surgery just about 20 years ago. This is you today: You are a successful businessman; you practically own your town. Yeah, you like to play the horses, and you're not averse to a little sleazy stuff from time to time; you're on good terms with the cops


the crooks.

Anyway, last week you had this real bad bout of maybe food poisoning. You were up half the night, two nights in a row—ok, all of both nights—puking your guts out until they were gone and then puking some more, just air and some stringy green stuff flecked with red. Plus you had this throbbing pain in your left arm. And so you called up your doctor, reluctantly, as he's always trying to limit your freedom. Doc says, "Dude, get thee to the emergency room," and so like here you are, four days later, in his office.

OK, so picture yourself as this guy, fat and a little hung over, walking into his doc's office a week after that unpleasantness, admitting to some shortness of breath, some fatigue symptoms. The doc says, "We need to check your cardiovascular function. We're going to give you a stress test."

Now, what do you do if you are a normal, sensible human who would like to live at least another six months? You hop on that treadmill and do as instructed, don't you?

But what do you do if you are something other than a sensible person? What is your reaction if you are rich and connected and your entire worldview is fixated on the assumption that there are absolutely no limits to what you can do, and that, in fact, any limitations on or monitoring of you, on your intake of substances or your behavior, would be counter-productive to not only yourself, but to the well-being—perhaps the very survival—of the Free World? What do you do if you're that Very Important Person? You argue with the doctor.

Now, to change the metaphor just slightly, substitute the "you" in this story for CitiGroup, Wells Fargo, Bank of America, and maybe seven other of the 19 other big banks recently subjected by federal regulators to a so-called "stress test" of their capital positions.

It is rather as if that 62-year-old businessman had informed his doctor that any visible changes in his "lifestyle" would quickly redound negatively within the social and economic life of the town, and that anyway, unless he adjusts that stress test machine to a setting that would result in a sack of topsoil's stress test results looking akin to the results of a test of, say Lance Armstrong, Very Large Men in trench coats would soon appear at the doctors residence, during the early morning hours, to deliver to said doctor (and perhaps to his sleeping family) the sacred gift of pain.

And so it goes. The important businessman will not be required to give up the doughnuts, the steaks, the booze and hookers. He will not be asked to cut down on the gambling or the cocaine. He will not be monitored and his appetites will not be curbed. This is the meaning of the stress test.

The longer-term results are as obvious for the banks—and their caretakers, enablers and supporters—as they would be for your hypothetical 62-year-old businessman.