It's no surprise that the insolvent banks being propped up by taxpayer trillions continue to play games with America's money.  After all, we've firmly established that the Obama administration is taking their cues from the financial industry on everything from accounting rules to the so-called "stress tests".

Ahh, but it gets even worse:  Now we see the sweetheart deal the banks were given under the Geithner Plan were never acceptable in the first place...and the banks have no intention of participating in the program at all.

The Wall Street Journal reports that the Public-Private Investment Program -- better known as Geithner's Plan -- might never live at all.

The Legacy Loans Program [LLP], being crafted by the Federal Deposit Insurance Corp., [as] part of the $1 trillion Public Private Investment Program [PPIP] ... is stalling and may soon be put on hold, according to people familiar with the matter.[...]

PPIP was to be split between the FDIC program, which would buy whole loans, and one run by the Treasury Department focusing on securities. Treasury is expected to push ahead with its plan -- the larger and more substantial of the two -- and could begin purchases sometime this summer.

Given how much publicity -- and controversy -- Geithner's plan received when it was announced last March, that might seem a bit odd. But the reasons appear to be twofold. First, few investors or banks want to work with the government. And second -- and maybe more importantly -- few investors and banks now think they'll have to. The banks, in particular, are apparently enthused by their ability to raise private capital, and now think they can wait out the market turmoil and sell their toxic assets in a few years, when they'll be worth more money.

As disturbing as it is, here I am linking to an Obama story actually broken open by...Drudge.  But there you are.

In a sobering holiday interview with C-SPAN, President Obama boldly told Americans: "We are out of money."

C-SPAN host Steve Scully broke from a meek Washington press corps with probing questions for the new president.

SCULLY: You know the numbers, $1.7 trillion debt, a national deficit of $11 trillion. At what point do we run out of money?

OBAMA: Well, we are out of money now. We are operating in deep deficits, not caused by any decisions we've made on health care so far. This is a consequence of the crisis that we've seen and in fact our failure to make some good decisions on health care over the last several decades.

So we've got a short-term problem, which is we had to spend a lot of money to salvage our financial system, we had to deal with the auto companies, a huge recession which drains tax revenue at the same time it's putting more pressure on governments to provide unemployment insurance or make sure that food stamps are available for people who have been laid off.

So we have a short-term problem and we also have a long-term problem. The short-term problem is dwarfed by the long-term problem. And the long-term problem is Medicaid and Medicare. If we don't reduce long-term health care inflation substantially, we can't get control of the deficit.

So, one option is just to do nothing. We say, well, it's too expensive for us to make some short-term investments in health care. We can't afford it. We've got this big deficit. Let's just keep the health care system that we've got now.

Along that trajectory, we will see health care cost as an overall share of our federal spending grow and grow and grow and grow until essentially it consumes everything...

So, basically, Obama finally is admitting we're fucked in a three-day weekend news dump.

I've been saying we're insolvent for months now.  But to hear the President openly admit such a thing is shocking to say the least.  Obama goes on to say that major health care reform in order to reduce health care costs is essential, but it doesn't matter.

What cost will Obama pay for the price of this admission?  He has finally decided to be honest about the numbers, thinking that maybe we have enough time to change fate.

But frankly, we're too far gone.  We're trillions in debt, with tens of trillions of unfunded liabilities in the hole, with hundreds of trillions in derivative instruments floating around, waiting to explode.

We're not getting out of this one unscathed.  Obama, Timmy, and Helicopter Ben are printing money as fast as they can, creating credit at the rate of trillions a month, trying to pump dollars into a deflating economy with massive holes in it, like pumping blood into a man with a hole in his heart.

Obama is doing the only thing he thinks he can do, to create a huge credit bubble in order to prolong the inevitable, the likes of which will destroy our economy when it pops.

It's a Greek tragedy if you think about it.  But you were warned.  I warn you again:  our standard of living is about to plummet.  It will in no way be pretty.  The results will almost certainly be massive social unrest and upheaval for years.

But it is coming.

Be prepared.

Also available at ZVTS.

Still think Obama's going to close Gitmo?

President Obama on Thursday will try to take the reins on the debate over national security and rally support for his plan to shutter the military prison at Guantanamo Bay in what his administration is billing as a major address.

Seems like a no-brainer, right?

Don't be so sure.

President Obama told human rights advocates at the White House on Wednesday that he was mulling the need for a "preventive detention" system that would establish a legal basis for the United States to incarcerate terrorism suspects who are deemed a threat to national security but cannot be tried, two participants in the private session said.

Obama wants to hold these guys forever without trial, people.

You think any Senator in the US will allow that in their state after yesterday's roll call of the chickenshits?

Democrats aren't going to come through on this.  Neither will the President.  They want to codify into law the right to incarcerate people forever with no trial.  Think about that.  Not even Bush and Cheney asked for that.  They just assumed they had the right to do it.

Once you do codify this into law, anyone is a target.  Period.

At what point do we call the Dems and the President out on civil liberties, or is this the price of universal health care and climate change legislation?

So, America got the "good" news on Thursday:  the banks are fine!  Everything is fine!  The financial sector passed the stress tests with flying colors!  Indeed, Friday was a banner day for bank stocks across the board.  Wells Fargo stock was up 14%.  PNC was up 19% and change.  Regions Financial leapt up bu almost 25%.  And Fifth Third Bank stock gained nearly 60% on the news that it only needed $1.1 billion in capital to meet the government's strict requirements for a capital cushion.

Jim Cramer has declared the financial crisis all but over as a result.

Investors can buy almost any bank for the next week, Cramer said, as this group emerges from the black hole into which the credit crisis had pulled it. In fact, he called this a once in a lifetime move in the financials.

What's happening? The stress tests, that's what. The Treasury Department released its test results, and this sector is on much more solid footing than anyone had thought. Turns out Armageddon is no longer an option. Banks won't be nationalized. The worst-case scenario that the most ferocious of bears warned against is off the table. With confidence restored, Wall Street is rushing back into these stocks.

Confidence in the system!  Crisis averted!  Tim Geithner is a hero!  The banks passed the stress tests easily, and credibility has been restored in our financial system!   The bears were wrong!

The banks are fine!

So wonderful in fact that the banks are arguing that the stress test results shouldn't actually be released.

U.S. officials are leaning toward announcing the "stress test" results of individual banks next week instead of just summary results, a source familiar with administration talks said Thursday.

The source, speaking anonymously because talks are ongoing, also said officials will likely release the capital requirements of the 19 firms at their holding company level, not just the needs of their banking units. Some of the banks being tested, such as Bank of America, have large non-bank subsidiaries that were included in the assessments, the source said.

Regulators have stress-tested the 19 largest U.S. banks to determine their capital needs should economic conditions deteriorate further. The source said the announcement of the results has been pushed back, possibly to May 6.

Note the language.  "Possibly" we could see stress test results on Wednesday.  They are leaning towards "individual" results too, instead of releasing all the results publicly and at the same time.

I'm betting strongly that the banks that are hurting the most, the ones that truly are uncapitalized to the point of being insolvent?  You'll never know who they are.  The banks will refuse to let the government release the results to us.  Forget Wednesday.  The banks are angling for "never."

Back when the bank stress tests were first announced, I figured they would give Obama the political cover to implement Plan N and take over failing banks.  Obama could say "Well, we investigated the bank, we did our due diligence work, Banks X, Y, and Z don't have the ability to survive without complete restructuring, so we're going to put them in receivership and do just that.  They will emerge as better banks."  Nobody could really complain then, and the problem would go a long way towards being solved.

Unfortunately, it's looking like I was not only wrong (happens often) but it looks like the complete opposite has happened.

The Federal Reserve on Friday said the government is prepared to rescue any of the banks that underwent stress tests and were deemed vulnerable if the recession worsened sharply.

The Fed, in outlining the tests' methodology, said the 19 companies that hold one-half of the loans in the U.S. banking system won't be allowed to fail -- even if they fared poorly on the stress tests.

"The Fed reinforced its view that major financial firms are "too big to fail," and the government must do whatever is necessary to save them", said former Fed examiner Mark Williams.

"It appears 'too big to fail' is a fundamental philosophy -- it's a philosophical principle," said Williams, a finance professor at Boston University.

It's looking more and more like Timmy sold us up the river, folks.  You know those bank stress tests everyone keeps talking about as the key for saving the financial system from itself?  Turns out there's ample evidence to believe that the tests are at best, a complete ruse that will deliver no useful information about the true state of the banks, and at worst they are completely rigged.

Nobody could have predicted, etc...

The bank stress tests currently underway are "a complete sham," says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri - Kansas City. "It's a Potemkin model. Built to fool people." Like many others, Black believes the "worst case scenario" used in the stress test don't go far enough.

He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program's failings go way beyond such technical issues. "There is no real purpose [of the stress test] other than to fool us. To make us chumps," Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: "'If we lie and they believe us, all will be well.' It's Orwellian."

The former regulator is extremely critical of Geithner, calling him a "failed regulator" now "adding to failed policy" by not allowing "banks that really need desperately to be closed" to fail. (On Saturday, Geithner said on Face the Nation, if banks need "exceptional assistance" in the future "then we'll make sure that assistance comes with conditions," including potentially changing management and the board, but did not say they'd be shut down.)

Black says the stress test must also be viewed in the context of Geithner's toxic debt plan, which he calls "an enormous taxpayer subsidy for people who caused the problem." The fact bank stocks have been rising since Geithner unveiled his plan is "bad news for taxpayers," he says. "It's the subsidy of all history."

Two stories today highlight the fact that while Obama is doing a pretty good job as President in most respects, he's still letting the banksters run the damn country and will continue to do so.  First, we see the reason the Dow was up 150+ points today:  anticipation of tomorrow's announced rules changes in mark-to-market accounting.

It's unclear exactly what changes the FASB plans to make on Thursday, but none is expected to be radical enough to have an immediate impact on stocks. Still, most investment experts say bank stocks should be avoided until the full impact can be weighed.  

Advocates of mark-to-market rules say they provide a clearer picture of troubled assets' value because they are priced according to their present worth in the marketplace. The alternative, known as mark-to-model, allows banks to price the assets at a model determined by the institution and at times not easily in view of the investing public.

That's fancy MBA talk for "We're lying and we made this too complex for you peons to figure out on purpose, so take our word for it."

With the rise of derivatives used to package now-distressed mortgages, mark-to-market opponents say the rules need to be changed because there is no fair market value for the bad assets. The current bid offer in the marketplace is at a level that would wipe out some banks if they had to sell at those prices, some analysts say.

The Dow has come roaring back 20% in the last three weeks and economic data on home sales, durable goods, consumer spending and retail sales have gotten better rather than worse.  More than a few prognosticators believe March 2009 now represents the bottom of this recession, and that from here on out it's slow recovery...but recovery nonetheless.

Most analysts now agree, however, that there are some encouraging shafts of light after months of pitch-black news.

"The best news now is that despite the worst . . . daily litany of horrible news, the strongest renewed bank fears, despite all of that, we've got stocks today essentially where they were in October," said James Paulsen, chief investment strategist for Wells Capital Management, owned by the giant bank Wells Fargo.

In October, all three asset classes -- stocks, bonds and commodities such as oil and farm products -- were in freefall. Today, stocks are up roughly 20 percent in the past two weeks, the biggest such short-term rally since 1938.

"Despite some of the worst news, stocks have stopped deteriorating and have put in what I think is a relatively strong bottom," Paulsen said.

He's not alone in spying a glimmer of hope.

"I think the worst is behind us," said James Dunigan, the managing director of investment for PNC Wealth Management in Pittsburgh.

Dunigan points to recent better-than-expected data on retail sales, which bumped up in January and held in February, as well as an unexpected February increase in sales of existing homes. New data this week showed a 3.4 percent February increase in orders of durable goods -- big-ticket expenditures -- which added a dose of feel-good.

"You are starting to get some whiffs of that in some of the indicators that are starting to come out. . . . All of the news isn't as consistently bad as we saw," Dunigan said. "I don't think we need to get a lot of good news. We need to get some consistently less-bad news."

Much is being made of the publicly printed resignation letter of AIG executive VP Jake DeSantis.  The letter ended up in the NY Times Op-Ed section.

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in -- or responsible for -- the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company -- during which A.I.G. reassured us many times we would be rewarded in March 2009 -- we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

Timmy takes to the WSJ today to explain his plan for saving banks.  I'm actually glad to see this, Timmy The Invisible Boy seems to be trying to be visible.  In his own words:

The Public-Private Investment Program will purchase real-estate related loans from banks and securities from the broader markets. Banks will have the ability to sell pools of loans to dedicated funds, and investors will compete to have the ability to participate in those funds and take advantage of the financing provided by the government.

The funds established under this program will have three essential design features. First, they will use government resources in the form of capital from the Treasury, and financing from the FDIC and Federal Reserve, to mobilize capital from private investors. Second, the Public-Private Investment Program will ensure that private-sector participants share the risks alongside the taxpayer, and that the taxpayer shares in the profits from these investments. These funds will be open to investors of all types, such as pension funds, so that a broad range of Americans can participate.

Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.

Houston, we have a problem.

Roll Call reports (subscription required) that a group of centrist Senate Democrats are working to block parts of President Obama's agenda. As Obama and Democratic leaders consider using a budget rule to bypass Republican filibusters, some in the party are not going along.

    A bloc of Senate Democratic moderates is quietly maneuvering to keep open the option of vetoing two of President Barack Obama's most ambitious agenda items this year -- climate change and health care reform.

Eight Democrats who want to water down new climate change legislation have already joined with Republicans and signed a letter opposing any attempt to use fast-track budget rules to prevent filibusters. Many of the same Democrats also oppose using those budget rules to prevent filibusters of health care legislation.

Democrats aim to use a budget reconciliation rule to make some key proposals easier to pass. Under reconciliation, only 51 votes are needed to end debate and force a final vote, instead of 60.

Sen. Mary Landrieu (D-La.) and Sen. Blanche Lincoln (D-Ark.) are among the eight Democrats who signed the letter opposing reconciliation. Republicans are on their side, claiming the move would break Obama's bipartisan pledge.

The other six Democratic senators are Robert Byrd (WV), Ben Nelson (NE), Evan Bayh (IN), Mark Pryor (AR), Bob Casey (PA), and Carl Levin (MI).

One, Al Franken's 59th vote is even more important than ever right now.

Two, if these Senators are able to kill Obama's agenda on health care and climate change, we probably won't get another chance.

Evan Bayh especially has become a massive problem for Barack Obama and the progressive agenda.  Despite overwhelming margins in the House and Senate and broad public support for the Democratic Party's mandate, these Democrats are siding with the Party Of No on the most important legislation of our times.

The question is, what can we do about it?

First, be a red state Governor from the South who is presiding over a 10.4% unemployment rate.  Keep in mind 10.4% is technically for January.

Second, take the 25% of the stimulus money you, as Governor, have discretion over and choose not to create jobs or extend unemployment benefits, but to pay off part of the state's debt instead creating a grand total of zero stimulus with the stimulus dollars you have.  Bravely complain you are forced to use the rest of the 75% of the stimulus money to not pay off your state's debt by that horrible Hussein person in Washington, thus pissing off local political leaders in your home state.

Third, make sure your maneuver is seen as a completely political ploy to run in 2012, and get called out on it, and be made to look like a complete jackass nationally and get sabotaged in your own back yard.

Fourth, run for the GOP ticket in 2012.

Gods above and below, I hope they nominate his ass.

I don't know how many times I have to say it, but I'll say it again:  The GOP must destroy America's economy by any means necessary in order to regain political power.  How quickly America has forgotten that when Democrats raised the idea of a stimulus plan eight months ago, the GOP laughed and said our economy was fine.  They killed it in the House.  Bush immediately threatened a veto saying there was no need for it because our economy was the strongest it had ever been.