A financial asset securitization investment trust (FASIT) was a type of

special purpose entity A special-purpose entity (SPE; or, in Europe and India, special-purpose vehicle/SPV; or, in some cases in each EU jurisdiction, FVC, financial vehicle corporation) is a legal entity (usually a limited company of some type or, sometimes, a limited ...

used for

securitization Securitization is the financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, auto loans or credit card debt obligations (or other non-debt assets which generate receivables) and selling ...

of any debt and issuance of

asset-backed securities An asset-backed security (ABS) is a security whose income payments, and hence value, are derived from and collateralized (or "backed") by a specified pool of underlying assets. The pool of assets is typically a group of small and illiquid asse ...

, defined under section 1621 of the

Small Business Job Protection Act of 1996 The Small Business Job Protection Act of 1996 () is a United States federal law. It was sponsored by Rep. Bill Archer ( R- TX) and it was signed into law by President Bill Clinton. The stated intent of the bill is: "To provide tax relief for smal ...

, and repealed under section 835 of the

American Jobs Creation Act of 2004 The American Jobs Creation Act of 2004 () was a federal tax act that repealed the export tax incentive (ETI), which had been declared illegal by the World Trade Organization several times and sparked retaliatory tariffs by the European Union. It ...

. They were similar to a

Real Estate Mortgage Investment Conduit A real estate mortgage investment conduit (REMIC) is "an entity that holds a fixed pool of mortgages and issues multiple classes of interests in itself to investors" under U.S. Federal income tax law and is "treated like a partnership for Federal i ...

(REMIC) but could also securitize non-mortgage debts, such as automobile loans and

credit card debt Credit card debt results when a client of a credit card company purchases an item or service through the card system. Debt grows through the accrual of interest and penalties when the consumer fails to repay the company for the money they have ...

. In the

Enron scandal The Enron scandal was an accounting scandal involving Enron Corporation, an American energy company based in Houston, Texas. Upon being publicized in October 2001, the company declared bankruptcy and its accounting firm, Arthur Andersen then ...

, Enron used FASITs to avoid

Subpart F Controlled foreign corporation (CFC) rules are features of an income tax system designed to limit artificial deferral of tax by using offshore low taxed entities. The rules are needed only with respect to income of an entity that is not currently ...

rules on foreign income. The

United States Congress Joint Committee on Taxation The Joint Committee on Taxation (JCT) is a Committee of the U.S. Congress established under the Internal Revenue Code at . Structure The Joint Committee is composed of ten Members: five from the Senate Finance Committee and five from the House W ...

staff, in their investigation of the Enron scandal, recommended that FASIT rules be repealed as they were "not widely used in the manner envisioned by the Congress and thus have failed to further their intended purposes" and because of the "abuse potential inherent in the FASIT vehicle".

References

See also