Rep. Scott Garrett: Q&A on U.S. Covered Bond Act

Congressman Scott Garrett (R-NJ) is a prime mover in the effort to establish a comprehensive legislative framework governing covered bonds in the U.S. — which many observers believe is essential to help develop this financing tool as a supplemental source of funding here. After proposing such a framework as a possible amendment to a larger bill last year, Rep. Garrett introduced the "United States Covered Bond Act of 2010" as a standalone bill (March 18). Cosponsoring the bill are a prominent Democrat, Rep. Paul E. Kanjorski (D-PA), as well as a senior Republican, Rep. Spencer Bachus (R-AL). 

Rep. Garrett in his Capitol Hill officeIn this exclusive interview with Covered Bond Investor,™ Rep. Garrett talks about the new bill and its prospects.  

You first put together a comprehensive covered bond framework as an amendment to the financial reform legislation.   When we last spoke, you weren't sure whether your next move would be to go the amendment route again or introduce a standalone bill.  Why did you decide on a standalone bill?

The best way, the best opportunity to actually get this thing done before the end of this session now is a standalone bill.  The idea of amendment was that we thought we had a "must-pass" piece of legislation — a "must-pass" from the majority [party's] side — the financial service reform bill.  But who knows where that's going to end up — it's been bogged down in the Senate. 

So a standalone bill that has bipartisan support potentially should be able to move through the process.

In the current Congress, where Democrats are in the majority and bipartisan cooperation between the parties has not exactly been a strong point, how confident are you that you can obtain enough votes for passage of the standalone bill?

At least to get the ball rolling, move it through [the House Financial Services] Committee, and move it through the House [of Representatives], I'm very confident.  Remember, although [House Financial Services Committee] Chairman [Barney] Frank [D-MA] has not said that he's signing onto this, he agreed to a hearing — and I'll say tacit support for the general idea that this is something that should be looked at.  [Capital Markets Subcommittee] Chairman Kanjorski has looked at this and signed onto it.  I think those things give it a real impetus to move through the Committee.

On the [House] floor as well, I think rank-and-file members will be looking to their respective leadership on both sides as to where we should go with this.  And with Paul Kanjorski and myself, and Spencer Bachus, I think that's a good starting-point.

I know you talked to Chairman Frank about covered bonds at various points and he was on record saying some good things about them.  Have you talked to him specifically about this new bill?

Not the exact wording, no. 

This new bill draws extensively from the language of the covered bond amendment that you had previously proposed, but it is not identical.  Are there any particular things you would highlight as different from or additional to the proposed amendment?

I'd have to think about some of the technical points.  We've had the opportunity since the time of the [proposed] amendment, which was several months ago, to flesh it out a little more with stakeholders, to address some of the concerns they had.  So it's just the nature of the process, you might say.

How do you see the possibilities, realistically, for getting this legislation passed in this term of Congress?

I'm not the best of prognosticators on bills, but I think we have a better than 50-50 shot at doing it.

The interview above was adapted from a telephone conference with Rep. Garrett on March 18.