Chicago Fed Letter: 'What are covered bonds?'

Richard J. Rosen is a senior economist and economic advisor for the Federal Reserve Bank of Chicago.  In December’s issue of the Chicago Fed Letter, Rosen sets out to "explore covered bonds’ usefulness as an alternative to mortgage-backed securities for home financing, and illustrate how they may affect the risks to the FDIC.” 

Among other things, Rosen sets up two hypothetical bank portfolios in order to illustrate a scenario where a bank’s use of covered bonds could increase the FDIC’s losses in the event of insolvency.  This is a clearly written analysis that covers important points.

To download a PDF, click on the item under “Attachment” below.