FDIC And Treasury Guidance May Spur Covered Bonds

Law360, New York (August 18, 2008, 12:00 AM EDT) -- In response to the developing housing turmoil and credit crisis, which continues to restrict the securitization of residential mortgage loans, U.S. federal regulators have issued guidance regarding a potential alternative method of on-balance sheet financing of these loans—covered bonds.

The four largest U.S. banks have publicly announced their intention to establish covered bond programs, which, as Treasury Secretary Henry Paulson noted on July 28, "have the potential to increase mortgage financing, improve underwriting standards, and strengthen U.S. financial institutions by providing a new funding source that...
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