Andrew Torgan
CNN Financial News Producer

Even though the government won’t publicly reveal the results of the bank “stress tests” until Thursday, numerous leaks are painting a troubling picture for some of the nation’s largest financial institutions.

According to several reports, regulators have determined that Bank of America may need roughly $34 billion in capital to weather a more painful economic environment. A company spokesman declined to comment.

Bank of America has received extensive assistance from the government to date, taking in $45 billion in taxpayer funds. A potential capital shortfall of this magnitude is certain to increase the pressure on CEO Ken Lewis, whom shareholders ousted as chairman of the bank last week.

Reports out Tuesday indicated that the government will direct more than half of the 19 banks that underwent the tests to boost their capital reserves, a move that officials hope will quell fears about the solvency of the financial sector.

New signs of life in the job market

The pace of job losses may be slowing, according to two private reports released this morning.

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Andrew Torgan
CNN Financial News Producer

More troubling news on the unemployment front today… the number of Americans filing initial claims for jobless benefits increased last week while the number of people continuing to claim benefits set yet another record high.

First-time claims for unemployment insurance rose by 27,000 to 640,000 from the previous week revised figure of 613,000. And the number of people receiving benefits for one week or more rose by 93,000 to 6,137,000 million. That’s the highest number on records dating back to 1967.

Earlier this month, the government reported that 2 million jobs have been lost since the beginning of 2009 through March, bringing the nation’s unemployment rate to the 25-year high of 8.5%.

Home sales drop in March

Sales of previously-owned homes fell in March but analysts say the housing market is showing signs of stabilization.

The National Association of Realtors said that so-called “existing home sales” fell last month to a seasonally adjusted annual rate of 4.57 million units, 3% lower than the downwardly revised rate of 4.71 million in February.

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Program Note: Tune in to the CNN Money Summit on Friday at 11 p.m ET to hear Ryan Mack and others weigh in on the economy.

Ryan Mack
President of Optimum Capital Management
AC360° Contributor

Somewhere in Detroit, right now, there is a union worker sweating as he helps to produce cars for this country on the assembly line. He thought that his contract with the UAW was set in stone but, unfortunately, to his dismay it was renegotiated and he has just found out that his salary was cut in order to keep his job. As well, he is now overly concerned that his health care will be reduced when he retires and his retirement will not be fully funded. All around him he hears horror stories of those who retired without the promised full pension and he sees the numbers of workers around him decrease every month by the dreaded pink slip.

The market falters because of the failure of the banking system, and the government calls upon this worker for help. Bush, Paulson, Bernanke, and other members of the government explain to this worker that if the banks fail he will be negatively impacted. This same story is repeated by Obama, Geithner, Bernanke, and other government officials. This worker is a little reluctant at first but he eventually gets the bigger picture. He understands how the system works so he reaches into his pocket with his calloused hand and pulls out some of hard earned capital to give to the banks to support the system.

Soon after, on his way to work at 4:30 am, getting prepared to do a double shift, he picks up a cup-a-joe and a newspaper with a headline that grabs his attention. Headline: “AIG Gives $165 million in Bonuses!” He doesn’t really follow the news that closely but thinks to himself, “I wonder if they used my hard earned money to bail out AIG as well?”

When he gets to work, in the locker room, many of the co-workers are talking about the same story. They ask him, “Do you see that we bailed out THOSE GUYS only to help them get their million dollar bonuses!?”

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Talking Points Memo
Josh Marshall

According to the Post’s A1 story tomorrow, the administration is ‘considering asking Congress’ (i.e., this is a trial balloon) to give the Treasury Secretary powers to seize non-bank financial institutions: in other words, the Lehman Brotherses and AIGs of the financial world.

Also in the background is the emerging debate about what government agency is going to take on the new role as ’systemic risk regulator’ — the Fed? or some new agency yet to be created. This is an issue that Elana Schor has been writing about at TPMDC. And it seems to be swirling in the background in the spat between the White House and Sen. Dodd.

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The Daily Beast
Lucinda Franks

In a Daily Beast exclusive, one of the fraudster’s employees tells Lucinda Franks that the supposedly legitimate brokerage operations were in fact just money-losing fronts for the fraudster’s scheme. Plus, what Madoff’s sons told staff the day after Bernie’s arrest, trips to the company’s secretive 17th floor, Bernie’s obsession with the color black and employee neatness, the roles of other family members, and visits to the founder’s Montauk home.

An employee of Bernard Madoff’s legitmate brokerage operations, which were described by the fraudster in his plea agreement as being “successful and profitable,” has told The Daily Beast that they were in fact money-losers that acted as a front for his Ponzi scheme.

He said that these businesses, the proprietary and market-making arms on the 18th and 19th floors of Madoff Securities, were designed to lure investors in, especially highly placed figures in society, and to fool the SEC into thinking that he had a large and impressive galaxy of businesses.

But behind the façade, these businesses were a shambles. They were excessively staffed with grossly overpaid people, and run with marked inefficiency, he said.

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Program Note: Watch Randi Kaye’s full report tonight on AC360 at 10 p.m. ET.

The pack of media at the home of AIG executive Douglas Poling as the group tries to deliver the letter.

Outside of Poling's house.

Randi Kaye | Bio
AC360° Correspondent

This was not your everyday guided bus tour. On board with me were a few dozen people who were either struggling financially or had lost their jobs or their homes. This tour took us through affluent areas of Connecticut so those less fortunate could see how some of the executives from AIG are living.

The tour was organized by the group, Connecticut Working Families, and dubbed the “Lifestyles of the Rich and Infamous” bus tour. It took us past two of the executives homes who had received big bonus checks from AIG even after the government had bailed out the company with about $170 billion in taxpayer dollars.

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Timothy Geithner
For the Wall Street Journal

The American economy and much of the world now face extraordinary challenges, and confronting these challenges will continue to require extraordinary actions.

No crisis like this has a simple or single cause, but as a nation we borrowed too much and let our financial system take on irresponsible levels of risk. Those decisions have caused enormous suffering, and much of the damage has fallen on ordinary Americans and small-business owners who were careful and responsible. This is fundamentally unfair, and Americans are justifiably angry and frustrated.

The depth of public anger and the gravity of this crisis require that every policy we take be held to the most serious test: whether it gets our financial system back to the business of providing credit to working families and viable businesses, and helps prevent future crises.

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Julian E. Zelizer
Special to CNN

In the explosion of outrage over the AIG executive bonus scandal, each party has hurled charges at the other. Both parties are blaming each other for rejecting measures that would have limited executive bonuses.

A few Republicans have called for the resignation of Treasury Secretary Tim Geithner — with efforts to paint him as the Michael Brown of this administration — and President Obama is promising that this week he will outline more stringent requirements for the financial world.

These partisan accusations miss a bigger factor behind last’s week’s revelations — America’s middle-way in dealing with business-government relations. In many ways, the bonus scandal was utterly predictable and would likely have happened regardless of which party was in power. And if history is a guide, the populist outrage over the bonuses may not fundamentally change the federal government’s relationship to private business.

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Nell Minow
Special to CNN

The stories about the outrageous $160 million bonus payments at AIG have all omitted the most important names.

They are the members of AIG’s Board of Directors Compensation Committee.

These people should have been on the hot seat before the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, alongside CEO Ed Liddy. Although there is a lot of blame to go around, ultimately the buck stops — or, I should say, the bucks should have stopped — with them.

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Ian Bremmer and Sean West
The Wall Street Journal

After quietly tolerating $170 billion in bailout money for AIG, why have the public, Congress and the administration suddenly blown up about a tiny fraction of that amount that is being paid out in retention payments and bonuses? After all, the AIG bailout channels U.S. taxpayer dollars to foreign banks and even potentially covers hedge-fund profits.

The reason is one of political expediency: The bonuses represent greed in the face of dire circumstances, which resonates with Joe the TARP-funder. The public now has an Enron-like target on which to unload its collective frustration about the financial meltdown. While public outrage is understandable, pandering to it jeopardizes the administration’s credentials in a sloppy attempt to score populist points. This raises the political risk for all investors in the U.S. (both domestic and foreign) significantly.

The financial-sector rescue necessitates unpopular actions that will only be politically worth it if the administration actually solves the crisis. Until recently, the Obama administration had taken pragmatic if slow actions that it deemed necessary to fend off disaster, as opposed to pursuing an ideological agenda in how it implements the bailout.

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