Wall Street is welcoming a plan by the Treasury Department to encourage the use of covered bonds, a neglected mortgage financing device that may bolster America’s sinking housing market.

The turmoil in the mortgage markets creates a reluctance to lend just when the economy needs it most, housing officials said. Structured bonds could offset this trend, Treasury officials say, because they offer an additional layer of security, which investors may find attractive even as they are avoiding more traditional bonds.

In a speech yesterday, Treasury Secretary Paulson called covered bonds, long popular in Europe but not previously used here, “an attractive resource for mortgage financing.”

Four banks, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, responded to the speech by announcing that they would begin offering the new structure.

“I think it’s a great move,” a senior vice president at Washington Mutual, Peter Freilinger, said of the plan. “It’s overdue, and the regulators, and particularly Treasury officials, needed to take a leadership role in this.”

Covered bonds have thrived in Europe for centuries, making up a $3 trillion market, but they have been almost entirely absent from American shores. While the collapse of the subprime mortgage market and the troubles at mortgage giants Fannie Mae and Freddie Mac provided the impetus for promoting covered bonds, they would have been embraced by investors far earlier had there been regulatory support, market participants said.

“The value of covered bonds in Europe comes from its endorsement, either regulatory or legislative, that this is better than just a rated bond or mortgage-backed security,” Mr. Freilinger said. The bonds require explicit regulatory approval in order to thrive in a new market, he said, because they are designed to appeal to investors seeking something safe.

A covered bond offers the holder what is known as a dual recourse. Normally, a bond is backed either by collateral or by a guarantee from the issuer. A covered bond is backed by both: One issued by Bank of America is backed by mortgages on the bank’s balance sheet, as well as by the solvency of the bank itself. If the bank fails, the bond holder has a claim on the mortgages; if the mortgages fail, the holder has a claim on the bank.

While market participants say they are excited by the possibilities of covered bonds, it is far from clear how large a presence they will ultimately have. For now, the move will provide, at a minimum, a means of supplementing the troubled mortgage-backed securities market.

“Covered bonds offer a way for investors to put their toe back in the water of mortgage-backed securities,” a vice president of Bank of America’s treasury department, Brad Brown, said. “In order to keep the engine running, we need other sources of liquidity.”

The future of covered bonds depends largely on how the regulators ultimately respond to this market crisis, Mr. Freilinger said. “The regulators are not done. Accounting rules are going to change, and legislation is coming,” he said. “But I think covered bonds will be an important part.”