Senators Introduce Bipartisan Bill to Support U.S. Covered Bond Market

Press Release

United States Senators Kay R. Hagan (NC) and Bob Corker (TN) were joined by Senate co-sponsors Chuck Schumer (NY) and Mike Crapo (ID) in introducing legislation today to support the development of a U.S. covered bond market. The Hagan-Corker "United States Covered Bond Act of 2011" (S. 1835) creates a legislative framework that expands funding options for U.S. financial institutions.

"The U.S. lags behind its global peers in the development of a covered bond market because we lack a legislative framework for issuers and investors," said Hagan, a member of the Senate Banking Committee. "With a legislative framework in place, U.S. financial institutions will have a powerful tool that can be used to fund loans to small businesses and households. This bill would level the playing field for U.S. financial institutions and help strengthen our U.S. economy."

"Covered bonds can be another stable source of private capital in the U.S., providing additional lending to businesses and families," said Corker, also a member of the banking committee. "Our legislation has bipartisan support in both the House and the Senate, and I hope we will have the opportunity to advance it in order to benefit our financial system and ultimately the broader economy."

"With the housing market still struggling to recover, covered bonds are a common sense solution that can help bring private capital back into the housing market," said Schumer. "Developing a U.S. covered bond market will also allow more U.S. investors to put their money to work supporting the American economy, rather than investing in covered bonds elsewhere, which they are doing now."

"By creating a legislative framework for the development of a covered bond market in the U.S., we have the opportunity to diversify and strengthen liquidity to finance mortgages and consumer credit," said Crapo. "I look forward to working with my colleagues to move this bipartisan legislation in the Senate."

Covered bonds provide U.S. financial institutions an important new tool for achieving stable, long-term financing from private capital markets. Financial institutions in 30 countries--including Germany, the UK, and Canada--already issue covered bonds. At the end of 2009, the total outstanding volume of covered bonds reached €2.4 trillion and this year foreign banks have issued $32 billion of covered bond to U.S. dollar investors. The funding that covered bonds provide would allow U.S. financial institutions to provide stable long-term credit to consumers, small businesses, and governments.

For the full text of the 'United States Covered Bond Act of 2011' click here.

In June, similar legislation introduced by Representatives Scott Garrett (NJ-5) and Carolyn Maloney (NY-14) passed out of the House Financial Services Committee with wide bipartisan support.