While everybody was watching winter’s last fury for this year (I hope), the Fed released a little-noticed report on its annual “stress-tests” of the 31 largest banks in the United States.  The good news was that all 31 have passed and with relative ease.  The better news is that the test was actually severe enough to match the Global Financial Crisis of 2008/9.  We are now much better prepared than we were before.

My greatest fear has long been that we will have a “Jim Fixx moment.,”  You’ll recall he was the father of running revolution who was healthy and lean but dropped dead from a heart attack.  My fear is that a derivatives blow-up, probably a credit default swap, will so weaken our banking system that it suffers a “heart attack.”  That fear is now reduced . . . somewhat.

The fear largely remains due to the lack of meaningful stress tests of foreign banks.  A typical problem is that we don’t know who is guaranteeing what debt to whom nor for how long.   For example, if Greece defaults, what customer of which European bank will default on his loan from the bank, causing the bank to write off that loan against its capital account.

Real progress has been made.  Now, when the ECB does what the Fed has done, I may stop feeling like Jim Fixx, even if I don’t stop worrying . . .