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New Jersey Rep. Garrett introduces the U.S. Covered Bond Act

NationalMortgageProfessional.com
Mar 19, 2010

Rep. Scott Garrett (R-NJ) has announced the introduction of the United States Covered Bond Act, with support from Rep. Paul E. Kanjorski (D-PA) and Financial Services Committee Ranking Member Spencer Bachus (R-AL) as leading co-sponsors. This legislation aims to help facilitate a robust covered bonds market in the U.S. to add liquidity and certainty to our nation's capital markets. “As the U.S. continues to recover from the financial crisis, it is essential that Congress examines new and innovative ways to unthaw our locked credit markets and encourage private capital to confidently re-engage by turning cash now on the sidelines into active investments in our country’s future,” said Garrett, Ranking Member of the House Financial Services Subcommittee on Capital Markets. “I believe that a robust U.S. covered bond market would offer numerous benefits to investors, consumers, and the broader financial sector, ensuring longer term liquidity that is more stable for U.S. credit markets.” Covered bonds have been used in Europe to help provide additional funding options for the issuing institutions and are a major source of liquidity for many European nations’ mortgage markets. The Garrett-Kanjorski-Bachus legislation is a thorough framework that seeks to provide the same benefits to the U.S. market. The bill establishes regulatory oversight of covered bond programs, includes provisions for default and insolvency of covered bond issuers and subjects covered bonds to appropriate securities regulations by federal regulators. “As a result of the economic difficulties that our country has faced in its housing sector and other industries, we must work to explore new ways to help the markets move ahead and also ensure that we enable consumer credit to flow again,” said Rep. Kanjorski, Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. “I am pleased to join with Reps. Garrett and Bachus to introduce this prudent legislation. Because covered bonds have worked well in Europe, and because they will keep skin-in-the-game for securities, we should now work to write it into U.S. law.” “The collapse of Fannie and Freddie and the taxpayer bailout that followed underscores the critical need to promote mortgage financing alternatives that are supported by the private market,” said Ranking Member Bachus. “Rep. Garrett’s bill will help establish an innovative and responsible source of financing that can reduce the cost of credit for families, small businesses, and the public sector.” The United States Covered Bond Act is the legislative follow-up to Garrett’s original legislation, The Equal Treatment for Covered Bonds Act, first introduced in 2008. During that same year, the U.S. Treasury Department issued a list of Best Practices which described the most prudent ways for interested issuers to offer covered bonds and the FDIC published a final policy statement that provided guidance to investors as to what access the FDIC would offer to the collateral in case of a bank failure. “I am optimistic that there is a good chance for bipartisan agreement on this issue. Once members understand how a covered bonds marketplace works and the benefits that it can offer homeowners, I believe Republicans and Democrats can come together and provide the legislative framework necessary to create a robust covered bonds marketplace here in the U.S. I want to thank Chairman Kanjorski and Ranking Member Bachus for working with me closely on this important legislation.” 
Published
Mar 19, 2010
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