In a report titled "Assets and Liabilities of Commercial Banks", way down at the bottom, Line #34, this amount just showed up: 34 Securitized real estate loans 12 -- -- -- -- -- -- -- -- -- -- -- 1,211.0 The "--"'s are previous months and the amounts are in billions of dollars. So $1.2 trillion just appeared? Here's the link: http://www.federalreserve.gov/releases/h8/Current/
At the top of the report: - For memo items of large domestically chartered banks (page 13), former item 34, "Securitized business loans," has been discontinued. On the same page, new item 34, "Securitized real estate loans," has been added to the memo items for both large and small domestically chartered banks. That is why there are dash marks for the previous months.
Don't try to understand ANY Fed speeches That's the purpose, that nobody undestands, so there are no massive selloffs.
Which do you want explained? Why it apeared or why it is? This is a partial exposure of the banking sector to real estate risk. This section includes all types of securitized loans with low and high risk factors. Simply speaking if the value of homes drop - or if the loans go into default - the number 1.2 trillion will have to be revised. Large banks have a residual value listed at 609 billions, so we are dangerously close to wipping most of it overnight. This could happen if the real estate broad market collapsed causing supply to flood the markets. Most people say it is very unlikely. Theory says it is possible. Let's say Bernanke is right with the 100 B estimate on loses. This is a significant percentage of the residual of banking system in USA. Problem is - the problem did not even start yet. We do not see people going into forclosures and banks are not listing with intentions of selling "no matter what". Prices even went up y-o-y 5% in some areas.