$200.4 Trillion derivatives in U.S. Commercial Banks

The notional value of derivatives held by U.S. commercial banks increased $24.5 trillion in the fourth quarter (2008), or 14%, to $200.4 trillion.

•The notional value of derivatives held by U.S. commercial banks increased $24.5 trillion in the fourth quarter, or 14%, to $200.4 trillion, due to the migration of investment bank derivatives business into the commercial banking system.

• U.S. commercial banks lost $9.2 billion trading in cash and derivative instruments in the fourth quarter of 2008, and for the year they reported trading losses of $836 million. The poor results in 2008 reflect continued turmoil in financial markets, particularly for credit instruments.

• Net current credit exposure increased 84% from the third quarter to a record $800 billion, and much of this is attributable to the sharp decline in interest rates in the fourth quarter.

• Derivative contracts remain concentrated in interest rate products, which com
derivative notional values. The notional value of credit derivative contracts decreased by 2% during the quarter to $15.9 trillion. Credit default swaps are 98% of total credit derivatives.

Source: The Office of the Comptroller of the Currency (OCC), quarterly report.

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TALF a Trillion for Commercial Real Estate

If you live in Florida one thing you notice is empty stores in malls. In Delray Beach we have one of those giant strip malls--lots of empty space. It is really startling to see. Restaurants in business for 20 years or more--gone. Circuit City, Linens and Things, you name it gone. And, associated businesses around these anchors--going, going, gone. The mall in Boynton Beach, Walgreens, now closing at 7 PM.

The goal is to head off a “looming crisis” that could spread far beyond “For Rent” signs and shuttered mall shops--Federal Reserve Chairman Ben Bernanke

“Empty stores in a mall deters shoppers just like it deters them in downturn areas if there is vacant space at street level,” says Todd Sinai, an associate professor of real estate at the Wharton School at University of Pennsylvania in Philadelphia. “Then if your retailers stop selling you cannot get new tenants.”

In carrying out the Financial Stability Plan, the Department of the Treasury and the Federal Reserve Board are announcing the launch of the Term Asset-Backed Securities Loan Facility (TALF), a component of the Consumer and Business Lending Initiative (CBLI). The TALF has the potential to generate up to $1 trillion of lending for businesses and households.

Here comes TALF to the rescue. One potato Wall Street, two potato banks, three potato homeowners, and a steak for commercial real estate.

The Treasury is readying a giant bailout for commercial real estate properties as rents fall and vacancies rise. Is this the next shoe ready to drop?

See Fed Press Release and Real estate woes seep into malls, office towers

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Bob DeMarco is a citizen journalist, blogger, and Caregiver. Bob has written more than 500 articles with more than 11,000 links to his work on the Internet. The content has been syndicated on Reuters, the Wall Street Journal, Fox News, Pluck, Blog Critics, and a growing list of newspaper websites. Bob is actively seeking syndication and writing assignments.

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In his article, Banks Sitting on $1 Trillion Cash, what abbreviation does Tony Crescenzi literally use?

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Question: In his article, Banks Sitting on $1 Trillion Cash, what abbreviation does Tony Crescenzi literally use?
Answer: ZIRP

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Crescenzi: Banks Sitting on $1 Trillion Cash

I noted recently the massive increase in the amount of excess reserves held at Federal Reserve banks by the nation's banks, money that basically is just sitting there, earning practically nothing.

Excess reserves are monies held at the Fed in excess of the banking sector's reserve requirements. In the week ended December 17th, banks had $774 billion in excess reserves, gigantically more than the customary total of just a few billion dollars.

The money is the result of the Federal Reserve's massive liquidity injections. Another way to gauge excess reserves is to look at the cash balances of commercial banks, which can be found in the Federal Reserve's H.8 release, the Fed's weekly report on the assets and liabilities of commercial banks. In Friday's release, cash balances held by commercial banks topped $1 trillion for the first time, reflecting cash balances held at the Fed. Pre-Lehman, cash balances tended to hover around $300 billion, with an annual growth rate of less than 1% per year.

The Federal Reserve's curse on cash, hexed as it was last week with the Federal Reserve's Zero Interest Rate Policy (ZIRP), will eventually pressure banks to use the cash, as net interest margins on loans are far more attractive than the return on cash. Of course, banks need to feel safe that default rates will be low enough to make the foray seem attractive. In due time.

(George Dowd, New Edge and Gary Kaminsky, former Neuberger Berman managing director discuss Crescenzi's note in the video).

More: Click for Latest Economic coverage ...

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Tony Crescenzi is the Chief Bond Market Strategist at Miller Tabak + Co., LLC where he advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. Crescenzi makes regular appearances on financial television stations such as CNBC and Bloomberg, and is frequently quoted across the news media. He is also the author of the forthcoming book, "Investing from the Top Down," "The Strategic Bond Investor," and co-author of the 1200-page book "The Money Market." Crescenzi is a contributor to RealMoney.com."

URL: http://www.cnbc.com/id/28347439/