[harry8]

There's regulation update and work around. The point of channeling the 1980s is because it was simple for the 101 explanation. Investment bakers will structure it for you if you need it, inline with the current regulatory environment. At one time cross border leases were fashionable for tax purposes. I don't keep up with such things to know if they still are.

[vasco]

How will they structure that for you to not show up on the balance sheet then? I'm not aware of a way, and the way you described wasn't true. All you now offered is "bankers can do it", but how without having to report it?

[harry8]

This isn’t something in which I’m an expert on any of the current details.

You can borrow a million dollars and use it to buy gold. An asset and a liability on the balance sheet each ba million dollars.

You can buy futures contracts with an underlying value of a million dollars. Nothing on the balance sheet. Zero dollars on both assets and liabilities.

The two are economically indistinguishable.

There are regulations around leases, for example, about what you have to capitalise on the balance sheet and when. Then there are workarounds for those rules. New rules cause the investment bankers to go to work. For a fee.

[vasco]

If you borrow a million dollars and buy gold both of those will have to be communicated to shareholders and indeed show up in the balance sheet. It doesn't matter if you say the lines add up to zero, that's still in the balance sheet shown for everyone to see.

[harry8]

Yes. That is the point. Borrow & buy is on the balance sheet as an asset and liability, as I explicitly said.

If you buy a futures contract with 1m of underlying value - it is NOT on the balance sheet. The balance sheet is unchanged. Economically it is exactly the same thing. It is exactly like you borrowed a million and bought gold with it but the loan and asset are invisible. Shocking, isn't it?

The structured finance dept of an investment bank uses exactly this (among other techniques) for off-balance sheet financing. There are rules they have to follow designed to prevent or minimise off balance sheet financing. You think the regulators have the investment bankers in a bind where they can do nothing and can't charge big fees resulting in the closure of all the structured finance departments? Well you know that could have happened without my knowledge, but I'd be quite surprised. You might know better? Do you want to bet?