The House Financial Services Committee today approved H.R. 940, the U.S. Covered Bond Act of 2011, by a vote of 45-7-3. Introduced by Rep. Scott Garrett (R-NJ), Chairman of the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, and Rep. Carolyn Maloney (D-NY), Ranking Member of the Financial Services Subcommittee on Financial Institutions and Consumer Credit, the U.S. Covered Bond Act of 2011 will help facilitate a robust covered bond market in the U.S. to add liquidity and certainty to our nation's capital markets.
"I'm excited to see this kind of progress on the covered bonds bill in the Financial Services Committee and I am eager for it to receive consideration on the House floor as soon as possible," said Garrett. "Our economy continues to face serious challenges on the road to recovery and the lack of available credit only makes things more difficult for America's job creators to begin hiring again. A U.S. covered bond market will both generate increased liquidity in the credit markets and level the playing field for U.S. financial institutions to better compete with their foreign counterparts."
Covered bonds have been used in Europe for centuries to help provide additional funding options for the issuing institutions and are a major source of liquidity for many European nations' mortgage markets. The purpose of the U.S. Covered Bond Act of 2011 is to create a legislative framework for the development of a covered bond market in the U.S. This framework will enable credit to flow more readily from the capital markets to households, small businesses, and state and local governments in a way that enhances stability of the broader financial system. The core elements of the legislative framework are legal certainty for covered bond programs and public supervision by federal regulators.
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