The U.S. market for covered bonds may be a step closer to reality thanks to the efforts of New Jersey Congressman Scott Garrett, who introduced an amendment during the House Financial Services Committee's markup of the Financial Stability Improvement Act of 2009.

The amendment is similar to the Equal Treatment for Covered Bonds Act Garrett introduced this summer in that it aims to pave the way for the creation of a U.S. market for covered bonds at a time when many outlets for lenders, like securitization, have been shut off. The proposed legislation calls for, among other things, the Federal Deposit Insurance Act (FDIA) to be amended to treat covered bonds the same way as other FDIA-qualified financial contracts when the depository institution parties enter receivership or conservatorship.

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