Stress Tests: An Abundance of Caution, or a Warning?

Have you noticed that the government has been giving banks "stress tests" to determine whether the banks have enough capital - for what? The stress tests supposedly measure banks' are sufficiently capitalized to survive a severe and prolonged recession. Why on earth would we test banks' ability to survive a severe and prolonged recession if we believed that the economy will improve by year's end?

It's a little reminiscent of the logical inconsistency between banks needing TARP bailouts last winter, and reporting record profits by spring. Am I the only one who feels like we've fallen into bizarro world?