Two reports warning of the enormous cost to taxpayers of insolvent banks were released this week. They fueled stronger calls for bank nationalization as the only solution to the paralysis in the nation’s financial system.

The first, a 250-page report released April 19 by Neal Barofsky, inspector general of the Toxic Assets Relief Program (TARP), revealed that his agency has launched 20 criminal investigations of fraud, insider trading and illegal mortgage modification in the $700 billion program.

“The sheer size of the program … is so large and the leverage being provided to the private equity participants so beneficial that the taxpayer risk is many times that of the private parties thereby potentially skewing the economic incentives,” the report states. “In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how these funds have been used by TARP recipients.”

The second report came from the International Monetary Fund (IMF), warning that the U.S. financial system is likely to lose $2.7 trillion this year from the global credit crisis.

Even so, Treasury Secretary Timothy Geithner gamely testified April 21 before the TARP Congressional Oversight Committee that he sees light at the end of the tunnel. He reminded the lawmakers that more than half the $700 billion TARP money was spent by the Bush administration even before President Obama took office. “Today,” he testified, “Treasury estimates there is at least $134.6 billion in resources … still available.”

He argued that the “vast majority” of banks have enough capital and that frozen credit markets are showing signs of thawing.

Really?