CFC Governor and CEO Sheldon C. Petersen submitted the following letter to the editor of The Washington Post in response to an article dated April 30, 2007.
May 3, 2007
Letter to the Editor
The Washington Post
1150 15th Street, NW
Washington, DC 20071
Dear Editor:
Your April 30 story “Defaults Plague Little-Known Big Lender” is laced with misrepresentations and selective use of facts. You have not fully and fairly reported on the financial position of the National Rural Utilities Cooperative Finance Corporation (CFC). While you seem unconcerned about the important mission of the rural electric cooperatives that created CFC, you also manufacture a story where none exists.
You seem to mock the fact that CFC receives “high marks from three rating agencies” by stating that such ratings “smooth the way for the CFC to borrow money cheaply on bond markets.” We would hope that the Business section of a major news organization would recognize the meaning of CFC being independently rated by all three SEC-recognized ratings firms—A+ Stable by Standard & Poor’s; A1 Stable by Moody’s Investors Service; A+ Positive by Fitch Ratings. Moreover, CFC has been rated investment grade at the mid-A level or higher since it entered the capital markets in 1972.
Your article relies on a flawed analysis of CFC developed by a firm that even you admit is “not one of the rating agencies recognized by the SEC.” The article does not disclose who requested and paid this firm to produce this report, nor that the misleading information in the report first surfaced in a newspaper owned by a telecommunications borrower that is in bankruptcy and in litigation adverse to CFC.
Another fact ignored in the article is that over CFC’s 38-year lifespan, credit-related charge-offs represent a very small percentage of our loan portfolio and are significantly below benchmarks for other comparable financial organizations. Instead you chose to focus on two troubled credits—one past and one present. Most importantly, you do not disclose that the article’s allegations are principally a repeat of allegations of a troubled borrower that have already been withdrawn with prejudice in the courts.
You also failed to mention that CFC has a proven record of constructively resolving troubled credits. In fact, the $1 billion troubled loan to a Texas cooperative that you cite was settled with no principal write-off.
As for CFC’s current fiscal health, your article does not report that CFC is exceeding its financial targets and that for the nine months ending February 28, 2007, CFC reported adjusted net income of $84 million. Instead, the article focuses on net income that is not adjusted for the impact of derivatives and foreign currency transactions.
Finally, your article ignores the important mission of the electric cooperatives, which provide electricity to the most rural (and often the poorest) areas of our nation. When the electric cooperatives created CFC nearly 40 years ago, no other private or government- sponsored entity was willing to finance electric cooperatives. Working hand-in-hand with the U.S. Department of Agriculture’s Rural Utilities Service, CFC has strengthened America’s rural infrastructure and enabled hundreds of rural electric and telephone systems to provide essential utility services to their consumers and reduce their need for federal loans.
Your reporting on CFC and other recent articles on financing for rural development shows a cynical disdain for rural America’s institutions and a lack of understanding of the positive impact of the cooperative business model on our economy.
Sincerely,
Sheldon C. Petersen
CEO
| 
