Banks aren’t getting out of the TARP as easy as they got in. According to Bloomberg, the feds have demanded that banks “raise specific amounts of new capital before repaying taxpayer funds, applying a more stringent assessment than the stress tests in May.”

JPMorgan Chase & Co. and American Express Co. were told they need to boost common equity, less than four weeks after being informed they had enough to withstand a deeper economic slump. Morgan Stanley was directed to raise more funds after already selling stock to cover its stress-test shortfall. One firm was told June 1, people with direct knowledge said.

This means two things. 1) That the government’s stress tests were indeed a sham designed to coax investors back into bank stocks. 2) That the government expects more pain for the banking sector and isn’t prepared to have banks get out from under the TARP only to come back begging for federal aid at a later date.

As former New York Fed executive vice president pointed out recently, if banks repay TARP funds next week, “politically, the administration can claim a victory. They can claim TARP is working, we’re getting our money back and making a profit. But there are more shoes to drop in commercial and industrial loans, leveraged loans, and real estate.”

As we have attempted to make clear all along in Notes , this crisis boils down to a battle between hope versus facts. You know which side Team Obama and the mainstream press is on. And you know which side we’re on.