UPDATED:  Republican Congressman Scott Garrett today (Tuesday) introduced the US Covered Bond Act of 2011, co-sponsored by Democrat Carolyn Maloney.

The bill has been readied ahead of a hearing on Friday of Garrett’s subcommittee on capital markets, insurance and Government Sponsored Enterprises, of which Maloney is a member.

The latest version differs little from an earlier discussion draft (see The Covered Bond Report’s story from earlier today for more on the previous version).

The document is available to download from The Covered Bond Report here:

Maloney-Garrett US Covered Bond Act of 2011

The following is the text of a release from Garrett:

Rep. Scott Garrett (R-NJ), Chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, and Rep. Carolyn Maloney (D-NY), Ranking Member of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, today introduced H.R. 940, the United States Covered Bond Act of 2011.  The United States Covered Bond Act of 2011 will help facilitate a robust covered bonds market in the U.S. to add liquidity and certainty to our nation’s capital markets.  

“As our country recovers from the fallout of the financial crisis, it’s more important now than ever before to provide the U.S. capital markets with new and innovative ways to unlock credit and encourage private sector capital to get off the sidelines,” said Garrett.  “This legislation will provide the necessary framework for a covered bond market in the U.S. to flourish and grow, while ensuring that U.S. financial institutions are no longer at a competitive disadvantage to their foreign counterparts.  I’m honored Rep. Maloney has joined me in introducing this important piece of legislation and I look forward to working closely with her over the coming months to help facilitate the creation of a covered bond market in the U.S..”    

“I am pleased to sponsor this bill with my colleague from New Jersey,” Maloney said.  “In the wake of the financial crisis, we need new investment vehicles that will attract investors to the securities market and increase the flow of credit.  With their success in Europe, covered bonds present a significant opportunity for U.S financial markets and I look forward to working to ensure their success in this country.”

Covered bonds have been used in Europe for decades to help provide additional funding options for the issuing institutions and are a major source of liquidity for many European nations’ mortgage markets.  The purpose of United States Covered Bond Act of 2011 is to create a legislative framework for U.S. covered bonds.  This framework will enable credit to flow more readily from the capital markets to households, small businesses, and state and local governments in a way that enhances stability of the broader financial system.  The core elements of the legislative framework are legal certainty for covered bond programs and public supervision by federal regulators.

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