Bloomberg has discovered some of the details of the "private-public investment partnership":

U.S. regulators may force lenders including Citigroup Inc. and Wells Fargo & Co. to sell assets and write down as much as $1 trillion in loans, twice what they’ve already recorded, based on Federal Deposit Insurance Corp. auction data compiled by Bloomberg.

Banks failing Federal Reserve evaluations of loans this month may be ordered to make sales worth as little as 32 cents on the dollar, according to FDIC data. That would be less than half of the 84 cents on the dollar the Treasury Department suggested was a possible purchase price. Some of the bank- insurance agency’s auctions brought 0.02 cent on the dollar.

Lower valuations would lead to new writedowns and capital injections from the $134.5 billion remaining in the Troubled Asset Relief Program, Nobel Prize-winning economist Joseph Stiglitz said.

“The only way banks will sell is under duress,” the 66- year-old professor at Columbia University in New York said in a phone interview.

Asset sales are the latest step in President Barack Obama’s effort to restart the U.S. economy through the most costly rescue of the financial system in history. Treasury Secretary Timothy Geithner’s Legacy Loan Program and Legacy Securities Program together are targeted to start at $500 billion and may expand to $1 trillion.

Geithner’s plan will purchase loans and be overseen by the FDIC, which will offer debt guarantees while the Treasury invests capital alongside investors.

Is this incredible? By refusing to temporarily nationalize these insolvent banks these numbers imply Zombie banks will eat the entire national economy.

The Financial Times has even more beyond belief details. These same banks are trying to sell each other worthless assets so they can put them into this PPIP auction.

But public opinion may not tolerate the idea of banks selling each other their bad assets. Critics say that would leave the same amount of toxic assets in the system as before, but with the government now liable for most of the losses through its provision of non-recourse loans.

Administration officials reject the criticism because banking is part of a financial system, in which the owners of bank equity - such as pension funds - are the same entitites that will be investing in toxic assets anyway. Seen this way, the plan simply helps to rearrange the location of these assets in the system in a way that is more transparent and acceptable to markets.

Translation: The taxpayer maybe really pissed as hell as this new shell game to rip them off but hey, it's ok because the Obama administration says so.