Treasury Eyed for Covered Bond Regulator

Rep. Scott Garrett, R- N.J., has reintroduced a bill to create a legal and regulatory framework for development of a covered bond market in the U.S. Covered bonds are used in Europe and Canada to fund commercial and residential mortgages. But unlike mortgage-backed securities in the U.S., covered bond issuers continue to hold the mortgages on their balance sheets. Under the Garrett bill, the Treasury Department would be the primary regulator of covered bonds and set standards and reporting requirements for issuers. "Once members understand how a covered bonds marketplace works and the benefits that it can offer homeowners, I believe Republicans and Democrats can come together and provide the legislative framework necessary to create a robust covered bonds marketplace here in the U.S.," Rep. Garrett said. Reps. Paul Kanjorski, D-Pa., and Spencer Bachus, R-Ala., are co-sponsors of the Garrett bill. Rep. Garrett is pushing for passage of his bill this year, possibly as a part of the financial services regulatory reform package. The House passed its reform bill in December and now it is in the Senate's court. If the Senate ever passes a bill, a House-Senate conference might present an opportunity. However, a spokesman for House Financial Services Committee chairman Barney Frank, D-Mass, indicated that the congressman may have missed his chance. "The House, without the support of Rep. Garrett, passed a comprehensive Wall Street Reform bill so that ship has sailed. As you may recall, Mr. Frank held a [covered bond] hearing at the request of Rep. Garrett in December. We have a very crowded calendar right now, so it is impossible at this time to say if we would be moving this legislation," the spokesman said.