Here's what Merrill had to say:
"Third quarter 2007 results reflect significant net write-downs and losses attributable to Merrill Lynch’s Fixed Income, Currencies & Commodities (FICC) business, including write-downs of $7.9 billion across CDOs and U.S. sub-prime mortgages, which are significantly greater than the incremental $4.5 billion write-down Merrill Lynch disclosed at the time of its earnings pre-release.."
“Mortgage and leveraged finance-related write-downs in our FICC business depressed our financial performance for the quarter. In light of difficult credit markets and additional analysis by management during our quarter-end closing process, we re-examined our remaining CDO positions with more conservative assumptions. The result is a larger write-down of these assets than initially anticipated,” said Stan O’Neal....
Why is it so difficult for MER to value these positions? Because they don't want to sell them, and mark them down even farther. So they use a more "conservative assumption." So they're halfway there. They went from mark-to-myth, to mark-to-model. Eventually they'll get to marking to market.
But they need the Fed's help first.