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Remarks by
Sheila Bair, Chairman,
Federal Deposit Insurance Corporation,
U.S. Treasury Mortgage Finance Press Conference
July 28, 2008

Thank you, Secretary Paulson. And thank you for your leadership in supporting new
sources of mortgage lending.
All of us have been working very hard on finding ways to stabilize financing for the
housing market. The best practices template announced by Secretary Paulson today
can be a key part of a more stable market to finance mortgage lending.
As we know all too well, there are no magic bullets to solve the housing crisis. One of
the big challenges is to reinvigorate the credit markets as a source of liquidity. Bankers
have been looking in recent months for new ways to fund mortgages as questions
continue to arise about the "originate-to-sell" model.
As this process unfolds, we absolutely must learn from the mistakes of the past. We
must ensure that market mechanisms return to incentives that encourage sound
underwriting and strong capital. I think that covered bonds can help achieve these
goals, while bringing positive innovation to the U.S. market as a new on-balance-sheet
financing tool.
As securities backed by mortgages that continue to be held by the originating bank,
covered bonds will provide needed liquidity to the bank while encouraging safe
The FDIC has worked with the industry since 2006 when the first U.S. covered bonds
were issued. Our goals have always been to balance the liquidity offered by the bonds
with our responsibilities as a banking regulator and deposit insurer.
To achieve this, earlier this month we issued a final Statement of Policy on covered
bonds. It addresses a simple question that the marketplace needed to have answered:
How would the FDIC respond as receiver for a bank issuing covered bonds? We believe
the Statement provides this clarity. We also believe the criteria we used will help foster
a balanced and sustainable U.S. covered bond market.
A vital next step is being provided today by Secretary Paulson. Treasury's best
practices for covered bonds set a high standard in which investors can be confident.
These standards also fulfill the requirements of our Statement of Policy.
We believe that such high standards for the industry strengthen the groundwork for a
vibrant and stable covered bond market. Covered bonds can be a useful tool to help

restore confidence and stability to the housing industry, as well as to the mortgage
finance system.
Combined with our Statement of Policy and these "best practices" for covered bonds,
the industry now has what it needs to more fully explore this new kind of mortgage
My congratulations to Secretary Paulson, and to his team at Treasury.

Last Updated 07/28/2008