The House Financial Services Committee debated Tuesday how to set up a covered-bond market in the U.S., including whether to establish an explicit backstop, but it was unclear how fast the panel was planning to move on the issue.

Rep. Scott Garrett, R-N.J., introduced a bill earlier this year that is designed to enhance the market for covered bonds, which provide additional liquidity for loans without the risks of securitizations. Policymakers generally favor such products because they are secured by a specific pool of loans, but unlike mortgage-backed securities, they are kept on the issuer's balance sheet. Covered bonds are widely used in Europe but have failed to catch on in the U.S.

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