rams a test for sub prime, page-5

'word is this problem will take "months to resolve" '

That is not strictly correct. Sure the US mortgage housing market shows every sign of getting worse before it gets better, which inevitably flows through onto how willing lending institutions are to write new loans. Similarly institutions with exposure to non repayable 'subprime' loans will be forced to take balance sheet hits - countrywide in the US is the obvious major candidate. However, the credit crunch and gridlock in the commercial paper market is not tipped to take 'months to resolve' - the central banks CANNOT AFFORD this to happen. It has lasted just over 2 weeks sofar which completely baffles credit market participants and none IN THE INDUSTRY would expect it to last another couple of months - that would be HISTORICALLY UNPRECEDENTED and hugely damaging to the financial infrastructure as a whole (not just minor players like the non bank lenders).

However, while oz banks may have to take ABCP and other loans back onto their balance sheets - and thus increase their capital holdings as required by APRA, and perhaps revise down earnings growth, they are NOT FACING LOSES. The australian mortgage industry is completely different to the US - mortgage lending rates remain much more conservative and are backed by far less bullish asset valuations. There remains ZERO expectation of a problematic default rate amongst australian AAA rated lenders (including rams).

Mixing up the ability of AAA rated borrowers to refinance XCP (which is temporary) with the fallout for those who hold subprime debt (which will be ongoing) is a schoolboy/punters' error. From the 8/10 the RBA will take XCP and RMBS as collateral for repos and this by itself will ensure lenders will, at worst, be able to refinance with the RBA.

Like I said before, if you don't know the industry either: 1) buy and hold until the market returns and the ASX rerates rams; or
2) stay well away to avoid getting stung and selling into an illiquid market. If you are a punter acting on some mates doom and gloom/blue sky story you are primed to get bent over, unfortunately.