United States

Treasury Secretary Henry Paulson reiterated his interest in covered bonds playing a part in the US mortgage market at a Federal Deposit Insurance Corporation conference yesterday (Tuesday). The Treasury has meanwhile followed up its recent Washington gathering with further, more focused discussions.

In brief: The Co-operative Bank is the latest UK financial institution to have turned to covered bonds, setting up The Covered Bond LLP.

McKee Nelson announced this week the creation of what is believed to be the first covered bond team at a US law firm. The Cover spoke to partner Kenneth Marin about the rationale for the move and its expectations for the US covered bond market.

Many government interventions since the subprime turmoil erupted last summer have been ill-advised and/or unwelcome. The US Treasury’s decision to get involved in the country’s stalled covered bond market is neither.

In brief: Barclays Bank has issued what are understood to be its first covered bonds, two £1bn (Eu1.26bn) floating rate notes. The bank is the latest UK issuers to have placed large sterling floaters since the Bank of England’s Special Liquidity Scheme (SLS) was established in April.

In brief: US law firm McKee Nelson is gearing up for the anticipated growth of issuance in the country with the creation of what it says is the first dedicated covered bond team in the States.

Critical assurances on the position of covered bonds in receivership and greater flexibility on eligibility criteria are two key demands of respondents to the Federal Deposit Insurance Corporation’s consultation on its proposed policy statement. The American Securitization Forum and Bank of America were among those getting their responses in ahead of this week’s deadline.

Washington Mutual has criticised Moody’s for a lack of understanding of the FDIC receivership process in its comment letter to the regulator regarding the planned US covered bond policy statement.

Attendees of the US Treasury’s covered bond meeting yesterday (Tuesday) described the get-together of market participants and regulators as both unprecedented and productive.

The US Treasury is holding a meeting today (Tuesday) bringing together regulators and market participants to further the development of the covered bond market in the States.

Moody’s last (Tuesday) night cut the rating of Washington Mutual’s covered bonds from Aa1 to A2. The action follows downgrades by Moody’s that in March left WaMu Bank’s senior unsecured rating at Baa2.

Last week the Federal Deposit Insurance Corporation laid the foundations of a US covered bond framework with a draft policy statement that it hopes to finalise in the autumn. The Cover spoke to Washington Mutual, the first US issuer to have launched a covered bond, for its reaction to the move.