The House Capital Markets and GSE subcommittee late Tuesday advanced a bill to create a U.S. covered bond market but major issues need to be worked out first before the measure is ready for a full committee markup.

The bill (H.R. 940) sponsored by subcommittee chairman Scott Garrett, R-N.J., would establish the regulatory framework for Federal Deposit Insurance Corp. (FDIC)-insured banks to issue covered bonds that are collateralized by mortgages and other assets.

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