Comment Text:
August 16, 2012
Mr. David A. Stawick
Secretary of the Commission
Commodity Futures Trading Commission
Three Lafayette Centre
1155 21st Street NW
Washington, DC 20581
Re: Proposed Clearing Exemption
Dear Mr. Stawick:
The American Farm Bureau Federation appreciates the opportunity to comment on the proposed clearing exemption for certain swaps entered into by cooperatives.
Farmers and ranchers rely on the Farm Credit System (FCS) and other cooperative financial entities for financial services. By allowing these institutions the option not to clear swaps related to member loans, the proposed exempt cooperatives rule ensures that farmer and rancher customers of these institutions will not face new costs associated with mandatory clearing of swaps.
In our experience, FCS and other cooperative financial entities are able to provide reliable, dependable financial services, in part because of their cooperative structure. Among other things, that structure allows members of cooperative institutions to hedge risk more efficiently because a cooperative bank can use swaps more safely and efficiently than individuals can.
As noted in previous (Oct. 4, 2010; Feb. 22, 2011; Jan. 4, 2012) correspondence, the Farm Credit Administration (FCA) already closely regulates FCS institutions. The FCA has full oversight of and routinely examines interest rate swap activities conducted by the FCS banks. None of the FCS banks presents a systemic risk to the U.S. financial system.
Allowing a cooperative bank to hedge balance sheet, interest rate and liquidity risks related to its lending business at the cooperative level ultimately means that its agricultural customers benefit from lower borrowing costs and more dependable financial services. Farm Bureau, therefore, urges you to clarify that swaps serving these functions will be exempt from mandatory clearing under the final rule.
Thank you for your consideration of the views of America’s farmers and ranchers.
Sincerely,
Mark Maslyn
Executive Director
Public Policy
