Time to make banks more stressed?

The Indicator from Planet Money

NPR

Business

4.7 • 9.2K Ratings

🗓️ 14 July 2023

⏱️ 9 minutes

🔗️ Recording | iTunes | RSS

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Summary

Stress tests are one of the many tools the Federal Reserve has to regulate the financial system. So why didn't stress tests help prevent the bank failures of Silicon Valley, Signature and First Republic? Today, we explain how stress tests work and why the Fed is considering an overhaul.

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Transcript

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0:00.0	NPR.
0:12.1	So there's this thing that doctors do when they want to see how healthy a person's heart
0:15.7	is.
0:16.7	You probably have seen this in like a sports strength commercial or something like that.
0:20.5	Allow me to demonstrate.
0:23.2	So they start by putting you in a treadmill and hooking you up to a bunch of electrodes
0:27.5	and heart monitors and start you off at a nice walking pace.
0:32.4	The doctor checks your vital signs and then speeds things up a little bit.
0:37.6	A few minutes later, does the same thing, checks your heart rate and speeds things up a little
0:42.4	more.
0:43.5	And this keeps going.
0:45.5	Check your heart rate.
0:47.5	Speeds it up.
0:48.5	Check your heart rate.
0:49.8	Speeds things up until it feels like your heart is working as bad as hard as it can.
0:56.0	This is what doctors call an exercise stress test.
1:02.3	And the point of doing this is not purely sadistic.
1:06.4	It's to put your heart in an unusual amount of stress, to see what it can take and how
1:11.7	it responds.
1:14.0	And the idea is by doing that, you can catch health problems before they become health
1:19.4	emergencies.
1:21.4	This is the indicator for planet money.
	...

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