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[nonattender]

http://en.wikipedia.org/wiki/Special_purpose_entity

[yankeefan]

We all have seen many SPE's (or SPV's) done for nefarious reasons (see-  Enron).  However, there are many good reasons for special treatment or isolation-  for example- many real estate investors put each property in a separate LLP or LLC.  I could even stretch the point and claim that your basic corpoate structure is a SPE, allowing us to own the profits of the business while limiting our loss to our investment.

That said- the Enron type vehicle exploited serious loopholes in the accounting rules, which loopholes, I believe, were often pointed out to the corporations by their auditors.

Unfortunately for us "prosperians", many borrowers seem to be treating their loans as SPE's 

[cubbiesnextyr]

That said- the Enron type vehicle exploited serious loopholes in the accounting rules, which loopholes, I believe, were often pointed out to the corporations by their auditors.

I believe Enron's auditors not only signed off on the Enron SPE's, they helped create them.  That's one big reason why Arthur Anderson no longer exists.

[Cosmos]

Special purpose vehicles also allow for lower funding costs.  Also, they can have just about any credit rating you want them to have.  So GMAC debt is higher rated than the debt of GM, which gives GM access to funds at a lower rate and investors a higher rated debt to hold.

Of course, I won't begin to mention the quality of the ratings, that's another subject.