My understanding is that few banks were actually made insolvent, but that lots had to eat fire-sale prices due to liquidity issues. Your sketch isn't wrong, though.
> My understanding is that few banks were actually made insolvent
This was another can of worms. Mark-to-Market accounting was rescinded, partly to address this issue (http://online.wsj.com/news/articles/SB123867739560682309) but many folks thought the banks were dragging their feet on re-marking their housing assets well before that. So were they insolvent because nobody put an accurate, timely value?
Those that anticipated the situation by shorting the banks made some serious money (and then made less when the SEC banned shorting.)
My understanding is that few banks were actually made insolvent, but that lots had to eat fire-sale prices due to liquidity issues. Your sketch isn't wrong, though.