special purpose vehicle

Definition

A separate legal entity created for a specific financial purpose, often to isolate risk or achieve off-balance-sheet treatment. It's a corporate subsidiary with one job, usually something the parent company wants plausible deniability about.

Example Usage

The bank created a special purpose vehicle to hold subprime mortgages, which definitely wasn't a red flag in retrospect.

Origin

Structured finance practice that became prominent in the 1980s for asset securitization

Fun Fact

Enron used thousands of special purpose vehicles to hide debt, proving that just because something is technically legal doesn't mean it should be.

Source: Structured finance and corporate law terminology

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