Mortgage equity withdrawals.
2004 to 2006 were outright madness with roughly $750 billion per year in MEW. That was close to 6% of gdp. Notice how negative equity has begun to be a drag on personal income in the last year. The government can try to do whatever it can to prevent the housing collapse from playing out but resistance is futile. With over 25% of homeowners underwater and the amount of "strategic defaults' continuing to rise, bank balance sheets have further deterioration to go through. Thankfully for the big banks, mark to market accounting was replaced with mark to model, or mark to myth, whichever you prefer.
Mark to model, from investopedia:
The pricing of a specific investment position or portfolio based on internal assumptions or financial models. This contrasts with traditional mark-to-market valuations, in which market prices are used to calculate values as well as the losses or gains on positions. Assets that must be marked-to-model either don't have a regular market that provides accurate pricing, or valuations rely on a complex set of reference variables and time frames. This creates a situation in which guesswork and assumptions must be used to assign value to an asset.
Banks no longer have to accurate report what the asset side of their balance sheets truly look like anymore. They can make up whatever values they wish. Everyone on the street knows that were the banks to properly value their assets based on market values then they would be insolvent and would be forced into liquidation.
But because we live in bizarro world where normal rules don't apply to the big players traditional methods of accounting are no longer necessary. In the meantime, watch as home values continue to plummet downward as real unemployment hovers around 22%. In a economy of mass underemployment and unemployment, there is only so much time until more people start walking away. Will the banks still present these shining balance sheet for the investor class to see? Will the SEC continue to do nothing? In all reality, yes, nothing will change. There are no more rules for the big boys. They do what they need to do to survive while we are left to fend for the scraps.