Covered bonds may play role in mortgage-financing fix

A little-noticed bill introduced in the House last March may be the first step in connecting financial reform efforts with the eventual attempt to restructure the nation’s housing financial system and the deeply troubled Fannie Mae and Freddie Mac. The US Covered Bonds Act, introduced by Scott Garrett (R-NJ) and co-sponsored by Spencer Bachus (R-Ala.) and Paul Kanjorski (D-Pa.) and others, would add liquidity to the still sluggish credit markets and offer a private-market mortgage lending alternative to the government loans and guarantees of the two firms, which were taken over by the Treasury in September 2008 as the financial crisis was about to explode.

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