IMF: Global Financial Crisis Cost $4.1 Tril

The International Monetary Fund has released its latest Global Financial Stability Report, and guess what it doesn't show much of?

Pick a category, and you find signs of stress. Emerging markets? Check. Their banks face "liquidity and solvency pressures." Credit risk? Check. Lending standards are still tightening even after a global wave of looser money.

Government fixes help, but aren't doing enough. From the report: "Policy actions have prevented an even deeper crisis, but the limited market improvement to date has been insufficient to prevent the onset of the adverse feedback loop with the real economy."

A few key themes:

• The global credit crunch will be "deep and long-lasting".
• More bank writedowns are coming. "Deteriorating credit quality has pushed up our estimates of bank writedowns, increasing pressures on banks and other financial institutions to raise capital and shed assets." How much pain is left? Banks have scraped together $900 billion in new capital since the start of the crisis against credit loses of $2.8 trillion. While U.S. banks had write-downs of $510 billion by the end of the year, there could be another $550 billion coming through 2010. The euro area is worse. With just $154 billion in writedowns, the IMF sees another $750 billion to come. (That $4.1 trillion number covers losses from a wide range of global institutions including banks, insurers, pension and hedge funds.)
• Not all banks are bad, but there are lots of bad banks: "[I]f banks were to bring forward to today loss provisions for the next two years, before expected earnings, U.S. and European banks in aggregate would have tangible equity close to zero." That means more equity will be required, and that will likely come from the government. If you're a shareholder, dilution looks like the wave of the future.
• The next fix? More capital injections. Here's the recommendations: "Estimated equity requirements for banks in the United States by the end of 2010 are about $275 billion; for the euro area, $375 billion; for the United Kingdom, $125 billion; and for banks in other advanced economies in Europe outside the euro area, about $100 billion."

Bottom line: The crisis is global, and it's far from over. I've highlighted just a few of the problems outlined in the report, but you can pretty much point your mouse at any page in the report and cut-and-paste out some new unpleasant factoid. The rest of the IMF's report is here.