Bailout purgatory is bad for everybody, apart from the banks, their shareholders and their unsecured creditors. As Roubini points out, the government has been siphoning money into banks via capital injections, loan guarantees and financing with no strings attached.

After U.S. Federal Reserve policymakers meet today (Monday) and tomorrow (Tuesday), most experts expect a half a percentage point cut in the benchmark Federal Funds Rate – which is already 1.0%.