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.
