The IMF's Managing Director lays it out to Reuters:
The world is in a dire economic crisis, but no recovery is possible until the financial sector is cleaned up, the head of the International Monetary Fund said on Monday. ...
Although bailing out banks was politically unpopular, businesses and households could not survive without a working banking system, he said.
The IMF's experience of 122 banking crises around the world had taught it that economic recovery was impossible until banks were cleaned up, whether this was done quickly or slowly.
"You can put in as much stimulus as you want. It will just melt in the sun as snow if at the same time you are not able to have a generally smaller financial sector than before but a healthy financial sector at work," he said.