For a while, Pez candy dispensers were an UnTradeable -- until eBay created a market where these can be effectively bought and sold. However, the total value of all the Pez dispensers in the world wasn't measured in the trillions, or even 100s of billions. Even tho they are relatively illiquid, their small capitalization makes it viable. And don't forget, there is no leverage involved in any of the eBay items. Hence, no margin calls.
Now consider the size of the derivative marketplace based upon mortgages: Everything from RMBS to CDOs to CDC. It runs into the trillions.
If they cannot be effectively priced, are these products essentially untradeable?
Norton's comment: I believe AA and better are being taken by the FED as collateral on so called short-term commercial loans to investment banks and brokerages. The FED may also be buying some of these for their balance sheets. HOw will they be valued? How are they valued for the loans? At face model value? Now its taxpayer money hanging in the balance. Did you authorize this?
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