We studied "formal thought disorder" in schizophrenics, schizoaffectives, and manics by examining syntax processing and perception of meaning, using the "embedded click" and "memory for gist tasks," two paradigms that were developed by psycholinguists. To control for generalized performance deficits, a matched-task design was used. Contrary to expectation, patients did worse on a matched memory for digits task than on sentence processing. At a six-month follow-up examination, schizophrenics' performance did not improve while other patients' did. We concluded that psychotic patients have no specific language perception deficit but do have a short-term memory deficit. This deficit tends to remit for manics and schizoaffectives, but not for schizophrenics.