This week the Oxford University Press in the US announced the word of the year. The winner was 'unfriend', reflecting the growing influence of Facebook. Among the words shortlisted for the award was a favourite of ours here at Trading Floor, 'zombie bank - a financial institution whose liabilities are greater than its assets, but which continues to operate because of government support'.

But while zombie banks first rose to prominence in 2009, there's little evidence to suggest that they'll be laid to rest anytime soon in the US. The sick state of banks in the US and the huge toxic loans they are carrying has been highlighted here.

"Troubled loans went first into a "30-89 past due" cauldron, where they cooked for up to 89 days. Many healed themselves. Unemployed borrowers found jobs, warring spouses finalized divorce papers or scatterbrained professors returned from sabbaticals.

For many years, that group never rose above the $20 billion mark for any one quarter -- a small percentage of all outstanding loans.

The mortgages that made it to the "90-day past due" pot generally were written down to reflect the underlying real estate, minus holding, selling and foreclosure costs. This holding vat generally was reduced to about 25 percent of the first group.

Finally, while a bank-owned home awaited liquidation, it could be placed in the final cauldron, the "nonaccrual" pot.

Now, fast-forward to the quarter ending in June. The 30-89 past due pot, according to FDIC data, was around $68 billion nationwide. The second pot has almost $65 billion. The third pot, about $83 billion.

The loans are not being reappraised. Many "zombie loans" represent homes in which borrowers are living, in essence, free of charge or perhaps sending a few dollars in interest to draw out the process."

He calculates that there are nearly 400,000 "zombie mortgages." That's 400,000 homes with borrowers being subsidized by banks.