A House Financial Services subcommittee on Tuesday approved a bill to establish a U.S. covered-bond market.
By a voice vote, the Capital Markets Subcommittee approved the bill, reintroduced by Rep. Scott Garrett, R-N.J., chairman of the capital markets subcommittee, to create a legislative framework for covered bonds.
"I'm pleased to see the covered bonds bill receive such wide bipartisan support in the subcommittee," Garrett said. "With our economy still recovering from the financial crisis and the need to unlock credit at an all time high, facilitating the development of a covered bond market in the U.S. makes perfect sense. This legislation will not only generate increased liquidity but will also level the playing field so that U.S. financial institutions are no longer at competitive disadvantage to their foreign counterparts."
Garrett has touted covered bonds as an alternative to securitization. In a release, Garrett's office noted that covered bonds have been used in Europe as a source of liquidity for European nations' mortgage market. He argues that his bill could create such a market in the United States.
Garrett previously tried to attach the covered bonds bill to the Dodd-Frank Act and it even gained support from former Financial Services Committee Chairman Barney Frank (D-Mass.). But Senate conferees stopped the measure over concerns raised from the Federal Deposit Insurance Corp. and the Treasury Department.
