Who passed the stress test?

For many of us, spring is a time of renewal, rebirth and self-reflection. For banks, it is a time of regret, recrimination and self-rebuke. "If only we had studied harder," many of you can be heard muttering. "If only we'd stayed home for spring break instead of sponsoring a golf tournament. We would have gotten a better grade on our stress test."

But it's too late for all that. The results are in and they are not pretty. Many banks will spend the summer sweltering through remedial tangible common equity classes. And an unfortunate few will have to completely re-valuate their business plans. But banks in that group shouldn't feel ashamed. Some of you just aren't cut out for financial viability. Rest assured that there are many interesting opportunities in receivership. There's no shame in working with your regulators to build a relatively attractive distressed asset.

Sure, we're hearing the usual complaints about the tests themselves. They don't really measure a bank's inherent viability. They only benefit banks that are good at taking tests. Banks with access to expensive test-prep services or whose corporate parents already passed the stress test have an unfair advantage. All of that is true. But the plain fact is that we need some objective method to make decisions about which banks will succeed and which will fail. And as a practical matter, we simply do not have the time to, say, grade thousands of essays on "My Most Meaningful Credit Default Swap."

Not that we don't take the criticisms to heart. We do. And we'll be altering the tests for the next round of applicants in response to some of the concerns expressed by the last group. For example, it is possible that this question could have been formulated more clearly:

Bank A received $35 billion in TARP funds, even though it really didn't need the infusion. Now it is promising to repay the government as soon as its CFO remembers where he put the cash. Bank B received $30 billion in TARP funds and used most of it to pay retention bonuses to key staffers in its Totally Crazy S**t Division. Bank C received $20 billion in TARP funds on which it is relying to remain solvent. Nonetheless, the bank's officials decide not to cancel their annual corporate retreat. (This year's theme: Hedonistic Debauchery on the Taxpayer's Dime.) Assuming fourth-quarter GDP growth of 1.4%, a Vorp of 58.9 and a ßÞ? of 1.7 x 1045, which bank's CEO will be the next Treasury secretary?

The correct answer, of course, is "Yellowstone National Park." But many of you have noted, quite rightly, that "16.4" is also a plausible response, especially if one accurately deduces, as many of you did, that Bank A is actually a Ponzi scheme.

So we'll work on that one.

We also understand that the conditions under which the tests were administered could have been more conducive to contemplation and reasoning. Specifically, many of you cited such distractions as the presence of CNBC pundit Rick Santelli as a proctor, the chanting of a teabag-wielding mob outside the exam room and the difficulty of marking the little answer ovals without the use of a pen or pencil.

We acknowledge that these conditions might have been a bit unnerving. But remember: We were administering a stress test, not a sponge bath. In the future, though, we will ask the proctors to refrain from giving themselves sponge baths during the tests.

Finally, many of you have suggested that the tests be graded on a curve. Excellent suggestion. Here's another suggestion: How about a curve that starts at F and ends at F-? Honestly, what do you think this is? Socialism summer camp where everyone gets a bailout just for participating?

No, you'll just have to figure out a way to perform better on the test as it is currently designed and administered. You could try working harder, goofing off less and cutting back on extracurricular activities. Or you could try something that most of you do quite well. Cheat.