The stress tests have definitely achieved their principal purpose, which was, as I see it, to show that the Administration had a plan and was doing something: "Our plan is to have stress tests, and we are carrying them out." A nice drama, or melodrama, ensued, with a problem, the build up of suspense, and a happy ending, as shown by the big rally in relevant bank stock prices as the results were leaked.

Stress tests in general are a perfectly sensible, traditional financial idea: see how some entity fares in a given set of scenarios. Of course, much depends on all the estimates that go into such a test. It is ironic that the tranched subprime mortgage-backed securities that have caused so much trouble for everybody were all given credit ratings by stress tests.

Booms are full of overoptimism, busts of overpessimism. It may be that the stress tests are part of a transition to a helpful, less pessimistic stage.

Alex J. Pollock is a resident fellow at AEI.