ABN, NAB and RBS face Rams losses

One option Rams management explained in yesterday's briefing is the mechanics, and consequences, of simply not refinancing the US$6.4 billion in commercial paper repayable in the first weeks of the new year.

In the absence of a new investor in the mortgages a trustee will auction the mortgages and the "market value swap providers" make good on any losses. That is, the swap providers wear the losses.

The three banks in this boat are ABN Amro, National Australia Bank and RBS.

Presumably any losses would be a few cents in the dollar at the outside, and presumably then the likelihood of a loss is low.

Rams' problem in refinancing the loans is that the credit profile of many loans counts among US and other foreign investors as sub-prime, or near enough, regardless of how many times Rams and its advisers argue to the contrary.