INSTANT VIEW: U.S. kick-starts covered bond market

NEW YORK (Reuters) - U.S. Treasury Secretary Henry Paulson said the nation's four biggest banks were ready to kick-start a market for covered bonds that could help significantly expand home mortgage financing.

KEY POINTS: * "I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards and strengthen U.S. financial institutions by providing a new funding source," Paulson said at a press conference on Monday. * Covered bonds, issued by banks and secured by pools of assets like home loans, are widely used in Europe but have only become attractive in the United States since the segment of the mortgage securitization market driven by investment banks dried up last year amid a wave of foreclosures. * The Treasury Department issued a set of so-called "best practices" for financial institutions that issue covered bonds. The Federal Deposit Insurance Corp. has also offered guidance specifying how investors would get their collateral if an issuing bank fails.

COMMENTS:

DERRICK WULF, PORTFOLIO MANAGER, DWIGHT ASSET MANAGEMENT, BURLINGTON, VERMONT:

"On the surface, I just don't see what's new with this. It's not that different from the outright securitization market. If you don't like the assets in a securitization, why would you like them in a covered bond?"

"Investors tend to view plans from the Treasury with some skepticism. Remember MLEC?... They tend to be short on specifics."

"Quite frankly, I'm not sure the covered bond market will solve problems that cannot be addressed by other mechanisms."

"People are concerned that assets on bank balance sheets are of poor quality. I actually think banks are pretty well capitalized. I don't think they need the covered bond market."

ARTHUR FRANK, DIRECTOR AND HEAD OF MBS RESEARCH, DEUTSCHE BANK SECURITIES, NEW YORK: