Recession? Never heard of it. Financial crisis? I don't know what you're talking about.

Bank of America (NYSE:BAC) is a four-bagger from its low just over a month ago. Citigroup (NYSE:C) has more than tripled in value. Wells Fargo (NYSE:WFC) announced that it expects to post a $3 billion quarterly profit, sending the stock up over 30%.

On Friday, our suggestion that banks permanently attached to the government's teat might make inferior long-term investments was sharply rejected by readers as "utter crap."

Panic hasn't shifted to jubilation this quickly since ... well ... last fall -- the last time Citigroup tripled in value and Wells Fargo announced better-than-expected earnings.

Which makes us wonder: Is the worst really behind us, or is this just another emotional outburst by investors who've swung from chaotic pessimism to blind optimism?

While there are indeed sprouts of hope, investors have plenty of reasons to remain suspicious. Here are a few arguments for and against jumping back into bank stocks.

Reasons to be bullish

(1) Buffett was right
"The spreads have never been wider." Warren Buffett told us last month. "This is a great time to be in banking." Boy, was he right.

With borrowing costs at zero, it's almost impossible for banks to not post operating profits. That boost is largely behind Wells Fargo's earnings surprise, as well as Citigroup's recent announcement of operating profitability. When you can borrow money at 0% and lend it out at 5%, good things are bound to happen.

(2) Good news from the stress test
While official results haven't been released, The New York Times reports all 19 major banks will not only pass the Treasury's "stress test," but regulators have found banks' books in better shape than they expected.

The stress test was never meant to be pass/fail -- and some banks will be found to need more capital -- but the results are apparently strong enough to avert taking over a major bank in its entirety.

(3) Get ready for the write-ups?
We're doing everything humanly possible to get frozen portions of the credit market flowing again. Sooner or later, it'll work.

Between the public-private investment program, TALF, and trillion-dollar purchases of Fannie and Freddie securities, new prices might be discovered in a way that allows banks to write up the value of previously depressed assets. Relaxation of mark-to-market accounting rules could also let banks gain the upper hand on writedowns.

Reasons to be bearish

(1) Wells Fargo isn't your average bank
Sure, Wells Fargo appears to be doing great, but be honest -- Wells Fargo isn't exactly the poster child for financial fallout.

First and foremost, legacy Wells Fargo didn't have nearly the exposure to toxic CDO assets other major banks do, and the toxic waste inherited from the Wachovia acquisition was written down substantially as soon as it hit Wells Fargo's books. It also has a relatively small exposure to credit cards -- widely considered the next shoe to drop -- compared to Citi, B of A, JPMorgan Chase (NYSE:JPM), or American Express (NYSE:AXP). Most importantly, it priced risk better than almost anyone during the boom years.

That one bank is doing well means little for the industry as a whole. Since last fall, Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Wells Fargo itself have trudged along while other banks have teetered on bankruptcy. Taking results of the strongest banks and assuming it's universal to the entire industry is the same sort of baseless optimism that got us here in the first place.

(2) There's so much more pain ahead
Fun facts:                                                                            

  • The International Monetary Fund now expects total global writedowns to reach $4 trillion -- a mere $3 trillion more than banks have already absorbed.
  • Meredith Whitney estimates nationwide home prices will fall 30% more than they already have.
  • Even the government admits unemployment could breach 10% by next year.
  • The pain of commercial real estate and credit card loans has barely been acknowledged yet.
  • Even the strongest banks have historically slim tangible common capital ratios.

(3) What did I miss?                         
Bank-stock investors have been slaughtered over the past year because balance sheets turned into a black hole of trillion-dollar complexities no honest investor could fully comprehend.

Yet now that shares have rallied, investors feel like financial geniuses with all the right answers. Message boards are suddenly filled with investors triumphantly giddy over the riches of bank stocks ... but what's really changed besides the share price? Very little.

The truth is, the same problems we had last month -- exploding delinquencies, rising unemployment, falling home values, and opaque balance sheets -- are still here. As Paul Krugman said last week, "We have some real real problems. They are not going to go away through self-fulfilling optimism."

Just a few thoughts to consider. Got your own opinion on bank stocks? Feel free to share it with us in the comment section below.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. American Express is a Motley Fool Inside Value recommendation. The Fool owns shares of American Express, and has a disclosure policy.