Dueling Narratives! But which one wins?

Dana Milbank's story in today's Washington Post is like a sprig of forsythia - a bright bloom amidst a bleak wintery backdrop of doubt and debt.

Milbank starts the story with a rhetorical statement: "Maybe Barack Obama is really The One."

And apparently the president ranks among those considered to have god-like qualities because of all the good news we're hearing today:

"The economy? Recovering.

The markets? Rallying.

Swine flu? Abating.

Drought? Ending."

Such a difference 105 days makes! Just a few months ago, under Bush, the economy was so catastrophically battered that the government had to spend trillions to prop it up.

And now, recovery blooms brightly this spring.

But is it true? Or have we become caught up in a bubble of irrational exuberance once again?

Matthew Richardson and Nouriel Roubini are not nearly as giddy today as Milbank. In fact, they're kind of like a frost waiting to kill the lovely yellow blooms springing up in other mainstream media outlets.

Richardson and Roubini start their story in the Wall Street Journal by reporting what the government is telling us about the stress tests they've been conducting on banks:

"If we are to believe the leaks, the results will show that there might be a few problems at some of the regional banks and Citigroup and Bank of America may need some more capital if things get worse. But the overall message is that the sector is in pretty good shape."

The two Rs, however, are "glass-empty" kind of guys. They provide the kind of stats that really bring down the bubbliest optimist.

According to their story in the WSJ, the IMF is estimating nearly three trillion in losses on US loans and securities. Their own stats paint an even bleaker picture:

"Our estimates at RGE Monitor are even higher, at $3.6 trillion, implying that the financial system is currently near insolvency in the aggregate. With the U.S. banks and broker-dealers accounting for more than half these losses there is a huge disconnect between these estimated losses and the regulators' conclusions."

Nothing like the mention of an insolvent financial system to dim the joy we felt upon reading Millbank's sunny column.

According to Richardson and Roubini, it seems that a dramatic infusion of capital could be needed. And it might be needed because, according to the two Rs, the recipients of TARP have been accepting money from the government and sending it out as dividends, "paying out a staggering $400 billion in 2007 and 2008. While many banks have been reducing their dividends more recently, bank bailout money had been literally going in one door and out the other."

So much for the capital investment program within TARP.

The two Rs also report that some of the weakest banks have been buying up some of the riskiest investments lately - more of those AAA-tranches of nonprime mortage-backed securities that are clogging up the pipes. As they note, "if true, this is egregious behavior - and it's incredible that there are no restrictions against it."

The men confess to be "downright irritated" these days at the broken record coming out of our government, the one that endlessly repeats "if only we had the power to act...."

So as the government spins a rosy glow over the results of the stress tests, there are others who'd like the government to stop spinning and take significant action to get us out of this mess. In the words of Richardson and Roubini, "the government has got to come up with a plan to deal with these institutions that does not involve a bottomless pit of taxpayer money."

But maybe we'll have to wait until the real second coming before we see that happening....