Financial Service lawmakers unveil covered bond bill

“It’s more important now than ever before to provide the U.S. capital markets with new and innovative ways to unlock credit and encourage private sector capital to get off the sidelines,” said Garrett.  “This legislation will provide the necessary framework for a covered bond market in the U.S. to flourish and grow.” 

His bill will likely be the subject of hearing hosted Friday by Garrett’s subcommittee.

Covered bonds have been a mainstay in European, but have failed to gain traction in the United States. However, while asset-backed securities filled with subprime loans helped drive the financial crisis and broader recession, covered bonds carry an added security measure. While mortgage-filled securities could be originated and then sold off, an issuer of covered bonds is still obligated to pay out on the bonds if they default.

“With their success in Europe, covered bonds present a significant opportunity for U.S financial markets and I look forward to working to ensure their success in this country,” said Maloney, who is the ranking member of the committee’s subcommittee on financial institutions and consumer credit.