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The conventional wisdom was that 2008 would be the worst year for bank losses in years, but that it would be the bottom. The damage of mortgage-backed securities has moved into the past. What else could be left?

The figures for the last quarter of 2008, being reported now, show that 2009 could be astonishingly bad for big banks. The dozen largest banks in the world could easily lose a combined $100 billion. The problems causing that will certainly cascade into this year.

Deutsche Bank (DB), the largest bank in Germany, said it would post a loss of $6.4 billion. Analysts believe the red ink at Citigroup (C) could be more than $10 billion. Bank of America is expected to turn in a $3.6 billion loss. Those figures do not include JP Morgan (JPM), Wells Fargo (WFC) , Morgan Stanley (MS), Goldman Sachs (GS) and a number of deeply troubled overseas companies including UBS (UBS), Credit Suisse (CS), and Barclays (BCS).

Ben Bernanke recently said that banks would need another large infusion of capital. Even he may not know how large.

The wave swamping bank earnings has moved away from being caused solely by derivatives. LBO loans, commercial real estate, consumer credit cards, and corporate bankruptcies are building and will not peak until the momentum in joblessness and falling GDP stops accelerating. That could take well over a year.

The governments of the US and EU are faced with another act of "the great bank salvation." This time around it is not clear what the Fed and Treasury will get for their capital. They already hold equity in all of the large financial firms due to recent investment from the TARP. What faces the system now is whether the federal government will end up with de facto control of the private banking system.

Bernanke suggest creating a huge "bad bank" to own the toxic asset that are on the balance sheets of America’s largest financial companies. There is some precedent for that from the savings and loan catastrophe two decades ago.

But, the form of the next bailout is not the critical issue. Banks will get the money they need to keep the global credit system from collapse. What is at stake is how the government will handle owning a majority stake in what used to be the pillars of the nation’s financial system.

Douglas A. McIntyre