There's a new day dawning out there. Some analysts are proposing that bankers should be paid in toxic assets. Among the chief proponents of this idea are Vince Farrell of Soleil Securities and Jim Rodgers of Rodgers Holdings.

Now this seems to be a fine idea. The bankers, with their greed and excess speculation, took down our financial system. The U.S. Treasury and the Federal Reserve had to pledge $12.2 trillion of your money to bail out these ... (you finish the sentence as you see fit). Can you imagine what $12.2 trillion is like? Do you have any idea what this money could have done for our country?

When the financial crisis really got into full swing, a lot of banks ended up taking TARP money. Some banks needed it, and some banks were forced by Treasury Secretary Henry Paulson to take it.

Wells Fargo & Co. (NYSE: WFC) was one of those banks that was forced to take TARP money, and now it is making plans to pay the TARP money back.

Here's the interesting thing though. While many of the larger banks have paid the TARP money back, Wells Fargo says it is going to pay the money back without having to go out and raise additional funds for the bank -- something other large banks, like Goldman Sachs Group (NYSE: GS), didn't do.

Do you know where another $30 billion of your tax dollars are going? You guessed it. The Federal Reserve and the Federal Deposit Insurance Corporation announced that they will spend $30 billion dollars to buy toxic assets.

To do this they have chosen nine firms out of 100 that applied for the program. The guts of the program are that the government will partner with private companies to buy toxic assets.The Treasury supposedly did background checks to be sure that none of the firms chosen had any "conflicts of interest."

Just when I think I have heard it all, they come up with something even more eye-poppingly incredible. That's right folks. First they sucked you into the dot-com boom; then wiped out your tech stocks. Next they urged you to buy houses with money you couldn't pay back -- and those houses plunged in value while the global stock markets lost half their value -- further decimating your net worth.

Now they want to give you the once in a lifetime opportunity to buy the very toxic waste that is sinking the entire global financial system. And if you have a job in state government, your pension fund may be enticed into this financial sludge as well.

By caving into pressure from Wall Street, the Financial Accounting Standards Board (FASB) just single-handedly added at least 20% to the value of major banks burdened with formerly toxic waste. What just happened is that FASB passed an accounting ruling that allows the banks to decide the value of its toxic waste rather than letting the market set a price.

Many people are wondering when this recession/depression will end. Well the waiting is over.

Tomorrow a group of accountants will vote on a new accounting rule that will end the financial crisis. This rule, called FAS 157-e, permits banks to make up the value of assets they carry on their books that nobody wants to buy. By letting banks put whatever value they choose on these assets, they will no longer need to tell investors just how badly those assets have deteriorated.

This is obviously fantastic news for the global economy. We can now get back the $12.8 trillion we've spent bailing out the bad bets of banks and insurance companies. That's because the toxic waste that has so far caused them to take $3 trillion in write-offs is no longer toxic. In fact, the banks can mark those assets just as high as they want -- taking a profit by valuing them at, say, $1.20 instead of the 60 cents at which they're currently priced on their books. This increase in value will instantaneously give the banks as much capital as they want.

Today saw a monster rally brought on by Tim Geithner's Treasury plan to rid banks of toxic assets. Then a much "less bad" bit on the existing home sales showed a gain of more than 5% because so many are distressed house sales. And now there is a new issue to consider: The bears have to be worried as key upside technical resistance levels were taken out in the last hour of trading.

Here are the unofficial closing bell levels:

Dow 7,775.86 +497.48 (6.84%)
S&P 500 822.92 +54.38 (7.08%)
Nasdaq 1,555.77 +98.50 (6.76%)

Top Analyst Upgrades and Downgrades

Of course, there is no shortage of toxic financial assets. They are clogging the financial system and putting incredible pressure on global banks.

Typically, such things get bought up. But, with little visibility and the complexity of modern financial instruments, it's been tough to attract bottom-fishers into the market.

Yet, according to U.S. Treasury Secretary Timothy Geithner, it's important that private operators swoop in.

Most experts now believe that in order to recover, banks need to find a way to move their "toxic assets" off their balance sheets to stop the bleeding of quarterly writedowns.

The idea of establishing a "bad bank" to buy all that crap is gaining some traction in Washington, but Dennis Kneale proposes an alternative solution in a column on CNBC.com: "Turn all those rotting securities into an ETF, add a boost from government and let investors put a real, truly liquid value on 'em."

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Last week I posted on a colleague's plan to clean up the financial toxic waste dragging down our economy. The basic idea is for the government to buy the failed mortgages buried inside that toxic waste -- meaning that the owner of a toxic waste bundle would get that cash and not incur any loss from a failed mortgage for the next three years. The FDIC would buy the mortgages at face value less a $5,000 processing fee. In his plan, the FDIC would use its successful techniques to restructure those mortgages to keep people in their homes.

Why is this a good idea? My colleague's plan would unfreeze the market for the toxic waste, which might then be valued at 90% of its face value. And once an active market for trading the toxic waste emerged, we would no longer need to rely on mark-to-market accounting to estimate its worth. Suddenly, the toxic waste would become worth something that private investors would be willing to buy.

My colleague -- who worked with me on several consulting projects 25 years ago -- has an exceptional background. He's semi-retired and does not have a blog of his own. He retired from a military career, has five degrees including a Doctorate in Business Administration (DBA) from Harvard Business School (HBS) and completed consulting assignments with 74 companies worldwide. Not surprisingly, his plan has gotten some reactions and here are his thoughts on some of those comments:

In the heat of the moment very often bad decisions are made. According to OECD (Organization for Economic Cooperation and Development), the decision by the U.S. Treasury to shift the TARP money away from buying toxic bank assets to simply giving money to the banks was the wrong move.

OECD outlined steps to follow to return the banking industry to a sound footing: First, bank assets must be guaranteed to avoid a run on the banks. Second, toxic assets must be removed from bank balance sheets. This is the step that was not done. According to OECD, the failure to remove toxic assets from bank balance sheets only serves to prolong the problem and make it more dangerous. These toxic assets can get worse through more defaults, thus making it necessary to inject more funds into the banking system. It's like holding a stock that keeps dropping and dropping and your margin calls become larger and larger.

So far the Fed and the U.S. Treasury have failed to clear toxic assets from bank balance sheets. This is an absolute must if our banking system is ever going to return to normal and bring back trust in the system. Just ask yourself, would you want to invest in a business when you don't even know what "bad assets" are being carried on the books? Who knows, maybe the value of the toxic assets are more than the bank is worth, in which case it should be shut down. At some point, someone will have to "bite the bullet" and clean up this mess. Congress, the Fed and the Treasury must put a stop to the practice of allowing banks to keep some of their transactions "off the books." That's what got us into this crisis in the first place. We need full transparency from here on or we will never be able to trust our banks again.

What are your thoughts on this?

Last Friday the Fed announced a $200 billion dollar program for buying toxic assets from banks to help them stay afloat. Yesterday the New York Federal Reserve Bank started a new $500 billion dollar program for buying toxic securities from Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM)

Since Friday the yield on 30 year agency mortgage securities dropped from 208 basis points over Treasuries down to 190 basis points. This has had the effect of lowering mortgage rates. The rate on a 30 year fixed mortgage has dropped to 5.3% from 6% last November.

The Fed is using four firms to conduct these transactions. They are: BlackRock (NYSE: BLK), Goldman Sachs (NYSE: GS), Pimco and Wellington Management.

As was stated previously, the Fed has not disclosed the details of any of these repurchase programs. They are saying that they will be doing this "as the need arises."

A dramatic effect of this new Fed action is the sharp drop in US Treasuries, which today are down another 217 basis points on the 30 year March futures contract. Since last Wednesday the March 30 year bond futures contract has dropped from 141 down to 133 for a drop of about 800 basis points or $8,000.

I guess we can assume from all of this that Freddie Mac, Fannie Mae and the banks are in much deeper trouble than the Fed led us to believe last November. The Fed is not calling these bailouts any longer. They are just going ahead with these massive programs, programs that, by and large, investors and the public are not aware of.

What are your thoughts on these programs?

The year 2008 saw a slew of discount M & A (mergers and acquisitions) deals, most of them below book value. Among these were Wachovia and National City. Capital One Financial bought Chevy Chase Bank at .64 times book value.

If you look at the financial landscape for 2009, some names are already popping up for distressed sales, such as Citizens Republic Bancorp (NASDAQ:CRBC), Huntington Bancorp (NASDAQ:HBAN), Midwest South Financial (NASDAQ:TSFG) and Colonial Banc Group (NYSE:CNB).

It seems that we will see a continuation of the purging of bad bank assets in 2009. Banks use a practice of good/bad assets and move their worst assets to a separate company that absorbs the assets' future losses. Then the original bank emerges as a healthier, deleveraged institution.

All of this is taking place under the radar and it is difficult for investors and the public to know which banks are using this practice. When deleveraging becomes unmanageable, the federal government may need to step in and absorb a bank losses to avoid the bank's failure.

Do you believe the financials are a place to invest in 2009?

A cardinal rule of Washington is don't tick-off anyone chairing a committee essential to your operations.

Well, it looks like this U.S. Treasury Department has done just that.

U.S. Sen. Chris Dodd and U.S. Rep. Barney Frank have just about had it with the U.S. Treasury Department and its implementation of the Troubled Asset Relief Program (TARP).

Dodd, D-Connecticut and Chairman of the Senate Banking Committee, and Frank, D-Massachusetts and Chairman of the House Financial Services Committee, said this administration's Treasury department may not get the second half of the $700 billion TARP financial rescue fund, as they are upset at how the program is being run, Bloomberg News reported.

"I would be a very hard person to convince that this crowd deserves...the next $350 billion," Sen. Dodd told Bloomberg News.

Further, Rep. Frank said Treasury has ignored "clear Congressional intent," and that at the very least he wants to see that some of the new money was going to used for home mortgage foreclosure relief, Bloomberg News reported.