In Washington, clamor grows for a new Federal agency to deal with bad bank debt.

FORBES: Magazine Article

No prizes for guessing why: with all the bad debt on bank and company balance sheets, few are in any mood for major credit expansion.

CNN: Asia's Memory Lapse

The bank has plenty of reserves for bad debt but that takes away from profit, and the ability to invest in new business.

FORBES: BAC: Too Cheap To Ignore?

In fact, long-term debtholders who have debt claims against the bad bank and equity claims against the good bank will be better off under this plan than if the bank were liquidated or continued to operate as one bank.

WSJ: Banks Need Fewer Carrots and More Sticks

By announcing minimum prices at which it would buy bank debt, the agency gave banks little incentive to pursue bad debtors, even though they continued to manage their loans.

ECONOMIST: Latin lessons for Asian banks

The move triggered a short rally, but it did not solve the fundamental problem: Credit Suisse last week said that bad debt could be as much as 60% of bank equity.

FORBES: China's Economy: The Correction History Will Remember

But Bank of America reported a decline in quarterly profits after it took another financial hit on bad mortgage debt.

BBC: Morgan Stanley swings back to profit

Jean Mazaurelle, the head of the World Bank in Mauritania and the man in charge of overseeing the debt-relief programme, blames bad management rather than lack of cash for many of the country's problems.

ECONOMIST: Mauritania

There is still an inter-bank credit crunch across Europe and all three sectors - consumer, banks and governments - are still overwhelmed by bad debt.

BBC: Europe: Back from the brink

Bank of America has reported a big fall in quarterly profits after it had to take another financial hit on bad mortgage debt.

BBC: Bank of America profits fall after bad debt charges