The odd thing about this is that 4 trillion is the number I’ve been hearing as the banks own estimate of their losses for a few months now, I even mentioned it back in February.

If the banks think their losses are 4 trillion, that means the total losses are higher, and the worldwide losses are much, much higher.

Numbers are still being lowballed.  Now that doesn’t mean that 4 trillion will necessarily have to be spent by the federal government, the move to mark-for-market accounting, which allows banks to keep assets on their books until marutity at calculated prices, for example, will reduce how much money the government has to spend to keep banks from actually going under.  The Geithner plan, if it works, is likewise intended to inflate asset prices through the miracle of leverage, and that will reduce perceived losses.  If lucky, it might even reduce eventual nominal losses, by holding the assets to maturity and praying really hard that they don’t default, and that by maturity the market and economy are a lot stronger.

Still, all in all, my guess is that the IMF is still underestimating the issue.  In fact, it’s not even clear if there’s enough free money in the world to absorb all the real losses, but I suppose if everyone keeps printing enough money, we can get there.

Calculated Risk via Atrios