Regulators and politicians alike believe covered bonds could help fill the void created when and if Fannie Mae and Freddie Mac are dismantled, but right now one of the biggest stumbling blocks to the market moving forward is the Federal Deposit Insurance Corp. (FDIC).

Among other things, the agency is concerned that a bill introduced by Reps. Scott Garrett, R-N.J., and Carolyn Maloney, D-N.Y., in the House would give covered bond investors superior rights over secured creditors and increase the cost of bank failures. But Treasury secretary Timothy Geithner believes those concerns can be resolved, though it will take some work.

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