> it is not possible even in principle to tell if the ibank has rigged a CDO to have more than it's share of lemons!

Yes, you can purchase a bad CDO on a blockchain just as easily as you can purchase bad real estate in real life. Nothing prevents humans from misrepresenting data. But that isn't the point of the blockchain.

The point is that the transparency of the blockchain lets you (and others) know when you're holding a lemon, because you can see in real-time that no-one is paying off the mortgages in your CDO. What you do when that happens is a good question and the blockchain can't help [1], but it doesn't crash the entire market because people can tell the difference between your CDO and the quality ones that are still 100% good.

[1] it actually can help in one important way -- it provides an indisputable record of contract execution and payments that is not contained within the computer system of your counterparts (the bank). So if there is fraud it will be much easier to prove it to the courts than if you need to subpoena records out of the bowels of a corporate banking system.