Font Size: AAA // Print // Bookmark

Comment for Proposed Rule 76 FR 23732

  • From: Edward Barron
    National Rural Utilities Cooperative Finance Corporation

    Comment No: 45787
    Date: 6/22/2011

    Comment Text:

    The attached letter was signed by over 450 individuals who are member-owners of the National Rural Utilities Cooperative Finance Corporation (CFC), our wholly owned cooperative that provides us with financing, we encourage the CFTC to clarify in rulemaking that CFC, as an “end user” of derivatives, is exempt from the new margining and clearing requirements under the Dodd-Frank Act (DFA).

    By way of background, CFC is a nonprofit cooperative entity created and owned by consumerowned
    rural electric cooperatives (RECs). We, the RECs, established CFC in 1969 to supplement
    the loan programs of the U.S. Department of Agriculture. Since that time, we have continued to
    rely on CFC to provide us the financing necessary to deliver our end product – electricity – to
    consumers. CFC’s loans to us enable us to provide electric power service to more than 42 million
    rural Americans in 47 states.

    Congress explicitly recognized that end users of over-the-counter (OTC) interest rate swaps
    should be exempt from margining and clearing requirements. Under the DFA, Congress provided
    electric cooperative end users a clear exemption from the margining and clearing requirements
    for swaps used to mitigate our own business risks. In connection with making loans to us, CFC
    also uses OTC interest rate swaps to mitigate its business risks. If new requirements are imposed
    on CFC, the increased cost will undoubtedly be borne by our rural electric consumers in the form
    of higher rates.

    See attached letter for its full text. The over 450 signatures will be submitted separately because of the file-size limit.