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By Joan Gralla

NEW YORK, July 6 (Reuters) - The Port Authority of New York and New Jersey on Monday said World Trade Center developer Larry Silverstein had stopped negotiating over his demand for the agency to guarantee his bank loans for two office towers.

The national recession has withered banks' interest in making real estate loans while Wall Street's profit-crunch has left Lower Manhattan's with numerous empty offices.

The Port Authority, which owns the Lower Manhattan site where the famed twin towers stood, has been only willing to backstop loans for one of the three office towers Silverstein is building.

Silverstein and the agency have had numerous clashes over money and designs and on Monday they also disagreed over how the talks broke off.

"Larry Silverstein is not walking away from the negotiating table," his spokesman said.

In 2006, the Port Authority and Silverstein reached an agreement that requires them to settle differences via arbitration.

Silverstein has now sent the agency a notice beginning arbitration. The notice forces the two sides to resume talks for 10 days; if no solution is found by then, the clash could be turned over to arbitrators. Silverstein's spokesman explained.