As we like to remind our clients periodically, the auditor of an insured depository institution cannot be indemnified by their clients. Worse, ifthe bank suffers a significant loss and ends up in a regulatory resolution, the audit firm can face not just a civil lawsuit by investors -- but an enforcement action by the Fed, OCC and/or FDIC. In the event, the audit firm gets to explain why they relied upon "mark-to-dealer" pricing to value CDOs on the books of their bank clients. The moral of the story: Next time you call your friendly dealer for the monthly market-to-market on your CDOs, instead of merely asking for an"indicative price," ask for a live bid in $5 or $10 million -- and then hit the bid.
http://seekingalpha.com/article/39867-collateralized-debt-obligations-mark-to-dealer
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