Amidst discussion of the actions taken to assist Bank of America, the FDIC announced today its intention to extend its Temporary Liquidity Guarantee Program from a three-year maturity to a ten-year maturity for debt that is “supported by collateral [if] the issuance supports new consumer lending.” The program, which was adopted last fall, currently allows banks and bank holding companies to iusue FDIC-guaranteed senior, unsecured debt for maturities not longer than three years.

The proposal announced today would expand the program to include secured debt to the extent that such debt supports consumer financing. Although the FDIC has not specified what forms of consumer financing would be supported, likely candidates would include mortgage loans that are not eligible for purchase by Fannie Mae and Freddie Mac, credit cards, education loans, automobile loans and similar categories of consumer goods, the financing for which has dropped precipitously since the near freeze of the asset-backed securitization market that began last year.

Such an initiative may also make bank-issued covered bonds more attractive – specifically, might the availability of an FDIC guarantee make covered bonds an attractive investment vehicle and might the FDIC consider expanding the classes of consumer assets that may be included in covered bond to include non-mortgage assets, notwithstanding the FDIC’s decision (amidst industry protest) to exclude non-mortgage assets from its final covered bond policy last summer.