First the good news! The International Monetary Fund has scaled back the global writedowns for banks and other financial institutions to a mere $3.4 trillion. So that's $600 billion less of writedowns.

The bad news is that the number of bad loans will increase because of unemployment and patchy recovery.

In its Global Financial Stability Report, the IMF warns that while the economy seems to have stabilized, or at least it's not getting worse, there is a chance that it could dip again. "Our assessment of credit risks has retreated from historic highs, though overall risks remain elevated,'' the IMF warns. And the reason those risks remain high is because of delinquent loans. And the commercial real estate market is a complete mess right around the world. The IMF says: "The commercial real estate sector turned later than other sectors, but its deterioration is now in full swing. Rising unemployment and vacancy rates, falling property prices, and tighter lending conditions, are contributing to distressed sales and delinquencies in the United States. European commercial real estate markets are also under pressure, especially in Ireland, Spain, and the United Kingdom, where property prices have declined significantly."

It warns that while the banks now have enough capital, it won't be nearly enough to offset writedowns from bad loans over the next 18 months. Which means if there is any recovery, we won't see any sign of it until 2011, and that's if we're lucky.

The IMF also warns that there is still a problem with toxic assets on the books of the banks. And until that's fixed, nothing will get better.