This excerpt originally appeared in Confounded Interest on March 13, 2012.

Today, the Federal Reserve released their “end of the world” stress test. 4 of the 19 banks tested failed: Ally, Citi, MetLife and SunTrust. This severe recession or “end of the world” test includes a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices.