Securities that are not traded in public view...are now being supposedly marked to market... And just how does one know whether these values are truly representative... I suppose the trust me aspect of large Wall Street firms should not be questioned... Seems to me ...these values are supposedly legally supported.. And by the way...just who in the public view...is going to challenge the valuations...both in a legal and market sense... Transparency is obviously needed in order to create confidence in these markets...
Just because the public at large can't see it doesn't mean these marks aren't at all transparant. There are numerous circulations of live bid/offers for various OTC products. There are also various calculation agents and trustees in charge of aggregating these quotes from multiple sources for valuation purposes.
Do you have a point of sort? So long as the quotes used for valuation was actionable at that time, who cares what the motivation for those quotes are? isn't that the very definition of a market? And if it isn't and it's fraudulent, then it's a matter of fraud having little to do with the otc product itself.
I'm not sure what we're talking about here, but MTM is used for virtually all stock trading (non-retail), and has been for years. How else would you have a fair valuation of anything? Remember a stock is only worth what someone is willing to pay for it, not book value or last trade or anything else. Just a free market place. Don
Mortgage related securities...etc.....some of which are not traded every day...and whose value may be decided by a firms programming model... relative to ratings..etc...mostly relating to the sub prime issues...accounting issues relating to current standings etc...
some dormant bids/asks on an otc market don't indicate all that much if the stuff is not being traded and the market makers [stocks i'm talking about here, not sure about other instruments] can trade through your price and keep on going like you did not exist if they want to. It's possible to post no risk bid and ask prices if the market maker doesn't trade the instrument for himself... I've had markets go way past my orders on otc stocks...
Excellent Commentary All............. ....................................................................................... The bottom line...is that a lot of complex mortgage related securities have been bought by individuals responsible for managing large sums of money...and had done so because of AAA ratings... Now they hold securities that really were never AAA rated...not really...and the markets for some of the securities....are not reflective of copious current bid ask prices...and in fact ...some do not even have daily quotes...The firms attempt to value them...and the firms that have them will report whatever they feel like reporting...at prices they really do not know are accurate... Thus if the method utilized to value these securities was backed by the firms legal council...when in fact it turns out later that the guess was off the mark....then obviously somebody has to form another legal council to counter these previous claims.... Thus legal largesse is such that the leading firm has the edge to endure most of these debated claims ...thus legal largesse wins against most holders...with lessor legal resources...
After the mortgage market is rocked a little more...it is inevitable that big law suits are going to unfold...just to add fuel to the fire...