Garrett Announces Subcommittee Hearing To Review Proposal To Establish Covered Bond Framework

Cmte Financial Services (R)
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Garrett Announces Subcommittee Hearing To Review Proposal To Establish Covered Bond Framework

Capital Markets Subcommittee Chairman Scott Garrett announced the Subcommittee will convene a hearing on covered bonds this Friday, March 11 at 10 a.m. in room 2220 Rayburn.

Subcommittee Chairman Garrett said, “Each year, the U.S. economy misses out on billions of dollars in capital formation to foreign competitors because of our lack of a covered bonds statutory framework. The only way we can truly level the playing field with foreign competitors and foster the growth of covered bonds in the U.S. is to develop a legislative structure for a covered bond market to flourish. The goal of this hearing is to examine legislation to facilitate the creation of a robust covered bonds market in the U.S. to add much-need liquidity and certainty to our nation’s capital markets.”

Financial Services Committee Chairman Spencer Bachus said, “Covered bonds are an innovative source of financing that has worked well in many European countries, particularly in the aftermath of the financial crisis when many other traditional credit channels were badly disrupted. Not only would covered bonds provide much needed liquidity in our capital markets, but covered bonds are also a private market solution to the need for market participants to have ‘skin in the game.’”

The hearing, entitled “Legislative Proposals to Create a Covered Bond Market in the United States,” will examine draft legislation to create a legislative framework for covered bonds. Covered bonds, a form of debt issued by a financial institution, represent an innovative source of private mortgage market financing. The issuer of the bond is responsible for the risk posed by the underlying pool and maintains the bond on its balance sheet.