A likely amendment to the Financial Stability Improvement
Act should encourage covered bonds in the US. If passed, the
rules will offer similar features to European covered bonds
Congressman Scott Garrett detailed an amendment to the Act
on November 18. Despite the fact that he immediately withdrew
it, there are encouraging signs that it will pass and the plans
have been well received. "The amendment is really quite good,"
said Jerry Marlatt, structured finance partner at Morrison
& Foerster. "In some ways it is very similar to much of the
legislation in Europe where, if the bank is insolvent, the
protected pool of assets is set aside."
At the moment, the pool of assets in US covered bonds would
only be protected by an artificially created contract
structure, the enforceability of which is questionable.
Marlatt also pointed out that the Secretary of the Treasury
would be the...