Phrase of the Moment: Stress Test

If I hear the word stress test one more time today I think I am going to hurl.

“Before Stress Testing Banks, Find a Pulse,” reads the headline for Gretchen Morgenson’s New York Times column in the Sunday Business section. Listening to the Sunday morning talk shows, I heard the word stress test used at least three times. My editor at BusinessWeek recently inserted the words stress test in a story I wrote about a company’s finances that were under pressure.

What’s going on? Well, the global financial system is in a crisis, so we’re inventing new phrases to describe the horrific situation. In fact, part of Treasury Secretary Timothy Geithner’s plan to fix the banking crisis actually involves a stress test of every bank to determine its financial health. So I guess we’re going to be hearing these words a lot more over the next few months.

A CreditSights analysis, reported in the Times blog DealBook, found that according to its “severe” case situation, all the major banks and brokerages — Citigroup, Bank of America, Wells Fargo, JPMorgan Chase, Goldman Sachs and Morgan Stanley — might require further capital injections from the government. The future losses for some banks are staggering by CreditSights’ estimates: Wells Fargo, $119 billion; BofA, $99 billion; JPMorgan, $124 billion; Citi, $101 billion; Goldman Sachs: $47 billion; Morgan Stanley, $34 billion.

It’s not such a bad metaphor, given that our financial system is clogged up like a bad artery with all these toxic assets. The concept of a stress test actually derives from the medical field. Stress tests are given to patients with heart problems to determine the ability of the patient’s heart to pump blood.

It also has other uses. Apparently, there are tests that can gauge the level of stress in your life. I suppose a lot of people are taking these tests right now with the economic implosion. And engineers do stress testing to figure out the strength and durability of physical structures.

Ok, now that I am stressed out talking about all these stress tests, I am going to go to the gym and get rid of my stress.

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