I think it also depends on banks ability to maintain their loans. Banks have to borrow too, and the market is tight. That is why Rudd has to come out with the guarantee. Also, what other exposures do the banks have. ABS, AFG, sub-prime, derivatives losses, and the list goes on. How many punches can the banks take? They may have to sacrifice the big one to sustain many smaller ones.
Banks cannot be relied on to tell the truth. NAB for example, one month is no exposure to sub-prime and then a few months later raised money to write-off $800m sub-prime debts.
Banks are desperate to improve their credit ratings and one way is to minimise exposure to clients who are heavily leveraged.
I won't be too confident that banks will not pull the plug.
CNP Price at posting:
7.5¢ Sentiment: None Disclosure: Not Held
