In a Synthetic Lease a Special Purpose Entity (SPE) Is

question 16

True/False

In a synthetic lease a special purpose entity (SPE) is set up by a corporation that wants to acquire the use of an asset.The SPE borrows up to 97% of its capital, uses its funds to buy the asset, and then leases it to the sponsoring corporation on a short-term basis.This keeps both the asset and the debt off the sponsoring company's books.

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Definitions:

FDIC

The Federal Deposit Insurance Corporation, a United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.

Bank Panics

Situations where many bank clients simultaneously take out their funds because they're afraid the bank might go bankrupt.

Federal Government

The central government of a federated country, such as the United States, which shares power with constituent states or provinces.

Precautionary Motive

The desire to hold liquid assets or savings as a safeguard against future uncertainties and potential financial difficulties.