- Mall aboard: Future requires evolution at West Park Mall (3/24/17)16
- Legal discrimination complaint, ethics complaint filed in Scott City government (3/22/17)13
- Business notebook: Cape native goes from farm to mobile-food operation (3/20/17)1
- Former Scott City administrator: 'I was forced to resign' (3/21/17)6
- Former Southeast softball coach sues Board of Regents; seeks damages and her job back (3/23/17)14
- Triplett manslaughter case set for July 2018 (3/21/17)2
- Two people found dead in Advance house fire (3/21/17)
- Two local lawmakers back charter school bill; Perryville lawmaker objects to measure (3/19/17)24
- Two Cape men charged with second-degree murder of Grandi (3/21/17)2
- Lawmakers put prevailing wage in crosshairs; laborers object (2/12/17)10
Bush administration OKs new way to help mortgage market
WASHINGTON -- The Bush administration and federal banking regulators joined with the nation's four largest banks Monday to endorse a new way to pump money into the battered U.S. mortgage market.
Treasury Secretary Henry Paulson unveiled a set of best practices designed to encourage banks to issue a debt instrument known as a covered bond. The administration hopes these bonds will replace some of the mortgage financing that has disappeared as investors have incurred billions of dollars of losses on mortgage-backed securities.
"As we are all aware, the availability of affordable mortgage financing is essential to turning the corner on the current housing correction," Paulson said in launching the new effort.
Paulson was joined at the news conference by officials from the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision. All the agencies said they endorsed the new set of best practices compiled by Treasury.
Officials from banking giants Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. issued a joint statement saying, "We look forward to being leading issuers as the U.S. covered bond market develops."
Private analysts said that the new initiative should help stabilize the U.S. mortgage market but they did not view the effort as a cure-all for all the problems facing the mortgage market now.
This effort to jump-start a U.S. market for covered bonds followed action earlier this month by the FDIC to approve new regulations for the bonds, which are a way of packaging mortgage investments similar to an approach that is used in Europe where the market for covered bonds approaches $3 trillion.
Covered bonds are issued by banks and backed by cash flows from mortgages or other types of debt. Under this approach, banks guarantee the bonds, thus providing an incentive for less risky lending practices. Unlike mortgage backed securities, covered bonds remain on the balance sheet of the bank that sells the bonds.
Encouraging such a market to grow could be one way to decrease the dominance that Fannie Mae and Freddie Mac wield in the U.S. mortgage market.