Ouch. Policy makers world-wide must act immediately to avoid a "more wrenching" credit crunch as potential losses from write-downs of bad debt approach $1 trillion, the International Monetary Fund said. Governments should be ready to help a troubled bank if it poses a "systemic threat," it said, though only if shareholders bear the "full brunt" of the failure and there is an exit strategy. The fund also recommended that governments "prepare contingency plans for dealing with large stocks of impaired assets if write-downs lead to disruptive dynamics and significant negative effects on the real economy."
Now, let me see if I can understand this: plan to deal with a lot of bad stuff if write offs lead to disruption and panic. Yeah, that's about it. Pretty serious stuff.
The IMF report.