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This Week in Scandals: Stress Tests and Stress Positions

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Getty ImagesEvery week, we take stock of how the week unfolded for the stories we're tracking in Scandal Watch (see the right sidebar). Here is how we do it.  And, as always, feel free to suggest new scandals.

1. Market Crisis

The Federal Reserve today is going to give the nation’s 19 top banks their grades from the "stress tests" the Fed did.  And, even though it won’t publicly release the results of those tests until May 4, you can assume that jittery traders will try to read the tea leaves after today’s disclosures. The test results will determine which banks need to shore up their capital reserves and may ask them to explain exactly how they plan to do that.

The Wall Street Journal released some details of the Fed’s criteria on Wednesday, suggesting that banks may face hundreds of billions of dollars in additional losses. But before you start storing your cash under the mattress: A Treasury Department official told Time that while some banks may need more capital, none are likely to be deemed "too stressed to survive." The AP also got a sneak peak at the Fed’s methodology and reported that its focus on loans, rather than securities, may put regional banks at a disadvantage.

Of course, if you ask the banks, things are going just swimmingly: Several big banks reported surprising first-quarter profits, but New York Times columnist Andrew Ross Sorkin credits the rosy reports to financial "sleight of hand."

In other bailout news: The Treasury Department may make banks jump through a few hoops before they return TARP money, lending at bailed-out banks keeps sinking while spending on lobbying holds firm, and investigators have opened 20 criminal probes into suspected bailout fraud.

Don’t forget to check out ProPublica’s new bailout guide and blog.

2. Detainee Treatment

The Justice Department reignited the torture debate last week when it released four Bush-era legal opinions detailing harsh interrogation tactics. After some confusion on whether or not the current administration would consider prosecuting the government lawyers who wrote the memos, President Obama said on Tuesday that he hadn’t ruled it out, as he did for the CIA agents who actually administered the chokeholds and "stress positions."

The Senate intelligence committee also released a timeline of the Bush administration’s interrogation decisions, showing that Condoleezza Rice, John Ashcroft and other top officials gave CIA the go-ahead to use harsh interrogation methods as early as summer 2002.

Meanwhile, the Washington Independent points out a memo that the Justice Department didn’t release: one that spelled out how interrogations would continue once the Supreme Court granted Geneva Conventions rights to detainees in 2006.

We also still know very little about the prisoners who were held by the CIA in secret overseas prisons. As ProPublica reported, about three dozen are still missing.

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