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Bankers resist, because it could force them to recognize losses they would prefer to delay.
Indeed, E*Trade, as is common practice, does not recognize losses in problem loans until it considers them "permanently impaired".
At the same time, new accounting rules are forcing banks to recognize losses on securities portfolios, draining away their earnings.
If A.I.G. failed to produce the required amounts, the financial institutions holding its contracts would have to recognize losses of their own.
If there were an active market in troubled assets, the banks might have to recognize losses they now can pretend will vanish if they are ignored.
American banks have been quick to recognize losses, and policy makers have moved to contain the damage and protect the broader economy.
Similar(40)
Therefore, Enron purported to enter into certain "hedging" transactions in order to avoid recognizing losses from its investments.
During the last year, these two Wall Street banks alone have recognized losses on bad investments of a staggering $97 billion.
Banks have been rushing to unload these so-called cross-shareholdings to avoid recognizing losses on them when the accounting rules change next year.
Financial institutions across Europe are recognizing losses on their holdings of Greek bonds as it becomes obvious that the country will never pay off its debts in full.
As the experience of Japan showed in the 1990s, zombie banks tended to keep lending to troubled borrowers to avoid recognizing losses from bad loans.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com