The SEC:
… Fair value assumes the exchange of assets or liabilities in orderly transactions. Under SFAS 157, it is appropriate for you to consider actual market prices, or observable inputs, even when the market is less liquid than historical market volumes, unless those prices are the result of a forced liquidation or distress sale. …
Considering that pretty much every credit market has been defined as a “forced liquidation or distressed sale,” this amounts to a gigantic escape hatch from any semblance of objectivity in terms of pricing garbage level 3 assets.
