The Treasury and the nation's four biggest banks on Monday said they will kick-start a market for an investment product to support home financing in the latest effort to spur a slumping housing market.

Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup (C.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) said they planned to begin issuing covered bonds, which are secured by pools of assets like home loans.

And the Treasury released a set of "best practices" for covered bonds, in a move designed to help develop the market for the investment instrument.

"The key to the U.S. economy making a major improvement will be turning the corner on housing finance and on the housing correction," Treasury Secretary Henry Paulson told a news conference.

"We're not going to be able to do that unless we have availability of mortgage financing, and this is an attractive resource for mortgage financing."

The U.S. housing market has traditionally been supported by mortgage-backed securities, which involves bundling loans into securities and selling them to investors worldwide. Financing, however, has dried up since the wave of foreclosures spawned by the collapse of the subprime mortgage market last year.

Unlike mortgage securities, which pass all the risk to investors, covered bonds collateralized with mortgages would continue to perform even if the mortgages backing them default -- as long as the bank remains solvent.

Covered bonds 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.

"I think there'll be some issuance very soon," Paulson said. "There's not 100 percent certainty that it ever will become very significant but this is an innovative tool and we think it's one that we think is very promising."