Because nobody wants to buy Shitpile™, Shitpile™ asset prices have gone through the floor. Since the assets are required to be marked-to-market on the balance sheet, the fact that the market for them has frozen and the price has collapsed collapses the assets side of the banks' balance sheets. In the good old days, losses were not recognised unless they were realised, that is, an asset would be on the balance sheet at its original purchase price and the loss would be realised at the time of selling it. Liquidity had no impact on the balance sheet. Most of the Shitpile™ is still cash-flowing, it's just that the rights to that cash flow cannot be sold. The implied default risk given the prices is so astronomical as to be preposterous, but would you buy some Shitpile™ at what is currently likely a huge discount?

The only way to buy Shitpile™ is on cash, a leveraged purchase is too risky on the downside and leveraged purchases are more vulnerable the longer you intend to hold the assets. So if you're Warren Buffet and you're swimming in cash, or you're Bernanke/Paulson and can manufacture cash, you can buy Shitpile™ and hold it to maturity.

Now, the policy question is, can you unlock the liquidity and then set a monetary and fiscal policy that doesn't allow a repeat of the bubble?

The alternative view is that the "preposterously" high default and low recovery rates implied by the Shitpile™ prices are actually "accurate", and then you have a solvency problem.

A vivid image of what should exist acts as a surrogate for reality. Pursuit of the image then prevents pursuit of the reality -- John K. Galbraith