By Phil Mattingly
A bill aimed at establishing a viable U.S. covered bond market was among six measures advanced by the House Financial Services Committee.
The committee voted 44-7 today to approve the bill, which would provide a regulatory framework for covered bonds by giving the Treasury Department oversight of the market and creating a separate resolution process in order to bolster investor interest. The bill, if signed into law, could provide a boost to issuers including Bank of America Corp. (BAC) and JPMorgan Chase & Co. (JPM)
"This was a strong, bipartisan vote out of committee, so I think that should bode well on the House floor and bode well in the Senate where I think there is growing support over there as well," Representative Scott Garrett of New Jersey, the Republican sponsor of the bill, said today in an interview.
The House panel also approved two bills that would make changes to the Dodd-Frank financial overhaul enacted last year. Representative Spencer Bachus, an Alabama Republican who heads the committee, said the measures were designed to free up capital that has largely been sitting on the sidelines in the wake of the worst recession since World War II.
"These bills will remove government barriers to private- sector job growth and help our economy to create badly needed jobs," Bachus said.
House and Senate lawmakers, led by Garrett, have been drafting legislation for much of the last two years to create a market in the U.S. for covered bonds. Supporters say that they can serve as an alternative funding mechanism for banks and a way to provide liquidity in the mortgage market without relying on the federal government to securitize or insure mortgages.
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The largest U.S. financial industry trade groups, including the Securities Industry and Financial Markets Association and the American Securitization Forum, supported Garrett's measure.
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