08/04/2008

Hello:

Last week, the US Treasury along with the bank regulators issued guidelines on the development of a covered bond market to prop up US subprime mortgage values. This is a practice familiar to Europeans, but new to the domestic markets.

A covered bond is secured bank debt backed by the issuing bank (oh goody!) or by a pool of mortgages, should the bank fail (oh goody, goody!). A mortgage ultimately backed by more mortgages. Hmmmm.......

But wait, the cool heads at the FDIC have put a limit to this shell game. Only 4% of a bank's mortgages can be backed by covered bonds. What with FDIC's limitations, and the cost of issuing covered bonds, this shell game may amount to just peanuts.

Starting to think about "back to school" for children or grandchildren? Remember that the earlier you begin a college saving program, the easier it is to pay for tuition. For more information, feel free to contact us via email, phone or fax!

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager