United States

Sheila Bair, chairman of the Federal Deposit Insurance Corporation, is reported to have told a US conference yesterday (Monday) that she hopes to have a draft policy statement on covered bonds out in a month’s time.

The Federal Deposit Insurance Corporation (FDIC) has confirmed press reports that its chairman, Sheila Bair, is considering easing its stance on the interaction between covered bonds and the 90 day stay period in the US.

Peter Freilinger, senior vice president and assistant treasurer at Washington Mutual, said today that he would like to see either the Seattle-based institution or Bank of America, the only other US covered bond issuer, selling a jumbo in the first half of this year. WaMu could also target US investors through private placements.

Sheila Bair, chairman of the Federal Deposit Insurance Corporation, last week reiterated her view that covered bonds could be the cure for some of the ills of the US mortgage market, saying that developing the market in the US had become a “front-burner issue”. While encouraging words about the future of covered bonds in the US from such an important player are most welcome, it is perhaps better for the long term fortunes of the market if any misconceptions are cleared up early on.

Sheila Bair, chairman of the Federal Deposit Insurance Corporation, yesterday (Tuesday) told the Reuters Regulation Summit in Washington that US regulators were working on ways to help the covered bond market’s development in the States, particularly given the way in which the failings of the originate and distribute model had exacerbated the sub-prime crisis.

With the euro jumbo market closed in the short term and suffering supply pressures in the medium term, certain issuers have been sounding out the possibility of dollar transactions. Whether anything is possible in dollars is, however, questionable.

Moody’s has put on review for downgrade the triple-A ratings of WM Covered Bond Programme issues, after cutting Washington Mutual Inc from A3 to Baa2 and Washington Mutual Bank from A2 to Baa1, both with stable outlook. The rating agency had said in its pre-sale report that the covered bonds could come under pressure if WaMu Bank’s rating fell below A3.

Washington Mutual spreads ballooned again this (Thursday) morning on the back of a 17.3% fall in its share price yesterday (Wednesday), as concerns about its financial performance and the impact of the New York attorney general’s investigation into mortgage appraisals grew.

The ECBC’s “eight-to-eight” committee of the leading market-makers and issuers this (Friday) morning discussed market-making in Washington Mutual covered bonds in light of New York Attorney General Andrew Cuomo’s announcement yesterday that his office is suing First American Corp for allegedly colluding with WaMu to inflate mortgage appraisals, which had caused its spreads to widen sharply in early trading. However, the committee of leading market-makers and issuers said that the issue was outside of its remit and said that dealers should take up the issue with WaMu.

Leading issuers including Bank of Scotland and Depfa called for a greater commitment to the product from broker-dealers in New York if the covered bond market is to build on the foundations that they laid in the US early this year.

As a follow-up to yesterday's article on comments by Sheila Bair, chairman of the Federal Deposit Insurance Corporation, today we have posted clips of her speech on The Cover.

Panellists at the II Covered Bond Summit in New York on Monday including representatives of Bank of America and Washington Mutual were bullish about the potential for covered bonds to take hold among US financial institutions given the increased spread between covered bonds and other funding instruments that has resulted from the recent turmoil.