Over the past month or so, the stock market has enjoyed a healthy rebound after prior steep declines. Much of the rebound in stocks has been attributed to the notion that the recent "earnings" announced by the major banks have been "healthy".

However, there were many accounting "tricks" used to make bank earnings look good. For instance, Wall Street giant Goldman Sachs conveniently left out the month of December, a month in which they suffered heavy losses, in their earnings report.

Another "trick" was used by Citibank. Much of the earnings "gain" can be attributed to the gain Citibank made in purchasing credit default swaps (CDS) on themselves. The credit default swaps are a bet that Citibank would go bust. So Citibank made money by betting that they themselves would go bankrupt.

Yet, the talking heads on CNBC are celebrating these "great" bank earnings. This seems to be the same investing-on-hope that we saw during the dot-com bubble and the housing bubble.

What makes things worse is that it appears that the US Treasury under Bush Treasury secretary Hank Paulson actively encouraged fraudulent reporting from Bank of America, failing to disclose losses at Merrill Lynch to its shareholders. Bank of America CEO Ken Lewis was encouaged by Paulson and Fed chairman Ben Bernacke to keep quiet about the matter.

Here is the kicker - Merrill Lynch's bondholders should have had to take a loss on their bonds or have been forced to swap their bonds for Bank of America stock in the merger. Instead, those bondholders have been made whole for all of the losses that Merrill incurred, with 100% of the principal and interest paid on those bonds.

In simple terms, these bondholders have been made whole courtesy of the US taxpayers! Many of the people, such as Hank Paulson, who devise these Wall Street-biased "solutions" came from Wall Street and then the revolving door takes them right back to Wall Street once their time in Washington is done.

Current Treasury secretary Tim Geithner is another Wall Street insider who has changed policy little from his predecessor. Current US economic policy continues to be to misuse public funds and abuse public trust in order to protect the bondholders of the major US financial institutions from incurring any losses from their own mistakes.

The country needs to get away from having economic policy dictated from Wall Street. The current policy is a ridiculous policy which will have serious consequences down the road, such as a weakening dollar, higher inflation, and overseas companies coming into the US and scooping up assets very cheaply.

Please feel free to contact me directly with any comments or questions about this article.