Putting Out The Fire

Feds look to covered bonds to douse the credit-market inferno, but are they really ready for that role?

August 4, 2008

Can covered bonds, an 18th century financial technology, help US banks untangle themselves from a 21st century credit mess? Just four days before Henry Paulson touted covered bonds as one remedy for ailing credit markets, Moody's warned it may downgrade the rating of covered bonds issued by the nation's largest thrift, Washington Mutual. It wasn't exactly the most promising debut for a cure-all that the Treasury chief and others hope will serve as a balm for the credit markets.

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