The FDIC Offers Certainty on Covered Bonds - a step in the right direction


In March 2008, Treasury Secretary Paulson mused that covered bonds were “worth considering.” However, with

the credit crisis still under way and financial institutions battling increasing market pressures, Paulson has a decidedly more optimistic tone. In a speech on July 8, 2008, Paulson stated that covered bonds were a

“promising vehicle” to increase the availability and lower the cost of mortgage financing. He went on to say that

“[a]s Treasury seeks to encourage new sources of mortgage funding in the United States, improve underwriting

standards and strengthen financial institutions’ balance sheets, covered bonds have the potential to serve these

purposes and reduce the costs for first-time home buyers, and for existing homeowners to refinance.” Treasury

also called a meeting in late June with bankers, issuers and other regulators in an effort to jump start the covered

bond market in the U.S. and to create a regulatory and market practice regime that facilitates the issuance of

covered bonds in the U.S.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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