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How CDOs, CMOs, LILOs and SILOs All Turned into Alphabet Soup

BY Howard K. Weber
March 31, 2009

As we all know, the United States and the world are facing the greatest financial crisis since the Great Depression. Jobs have been lost, credit markets have seized up, and the economy by anyone's standards is in a recession. The general consensus is that due to this crisis an entirely new economic structure may be in place before it is over.

This recession has, of course, affected the leasing industry as well and the large-ticket, tax-oriented market in particular. Volumes in the large-ticket sector have declined dramatically over the last few years. All one needs to do is read the stories in the newspaper or go online to see how the industry has been affected.

One of the big stories over the past few years in the large-ticket leasing business has been the Lease In Lease Out/Sale In Lease Outs (“LILO/SILOs”) and how the Internal Revenue Service (“IRS”) has been winning most of the court cases brought to trial regarding these transactions, how it has offered settlements to the various investors, and how many of the guarantors have fallen below required thresholds in these transactions. Most of these declines in the credit ratings of the guarantors were caused by the larger crisis itself.

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