just reading about how they price level 2 assets. different to level 3 pricing but still some internal model pricing going on here. i think the worrying thing here are two poimts. (1) the potential unwind of forced selling of level 2 and level 1 assets to cover losses in level 3 assets or worthless level 3 assets. (2) the sheer size of level 2 assets. for example: goldman - $ 494 billion. citibank - a staggering $ 939 billion. even if you assume a realistic 10% devaluation of citi banks level 2 assets thats $94 billion dollars. i cant find the likes of lehman, stanley and some of the other banks. i hate to think. anyway click on the link below to a great story about level 3 decimation. Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: a) Quoted prices for similar assets or liabilities in active markets (for example, restricted stock); b) Quoted prices for identical or similar assets or liabilities in non-active markets (examples include corporate and municipal bonds, which trade infrequently); c) Pricing models whose inputs are observable for substantially the full term of the asset or liability (examples include most over-the-counter derivatives including interest rate and currency swaps); and d) Pricing models whose inputs are derived principally from or corroborated by observable market data through correlation or other means for substantially the full term of the asset or liability (an example includes certain mortgage loans). http://www.prudentbear.com/index.php?option=com_content&view=frontpage&Itemid=69&art_id=4809