The following letter is being mailed to members with the next monthly billing statement:
November 10, 2008
Dear Member,
Yankee decreased its variable interest rates to members by 0.25% effective November 1.
The commercial bank prime interest rate fell twice in October. It fell by 0.50% (from 5.00% to 4.50%) following an unexpected action by the Federal Reserve (Fed) on October 8. Yankee did not decrease rates in response to that event. See my letter dated October 10. The prime rate fell again by 0.50% (from 4.50% to 4.00%) following Fed action at its regularly scheduled meeting on October 28-29. Our 0.25% decrease effective November 1 was in response to this event.
Why didn’t Yankee decrease its rates by the full 1.00%, or at least the 0.50% in the latest action?
Our cost of funds has been materially impacted by current events in the financial markets. We have seen an increase in both the level of our cost of funds relative to U.S. Treasury debt and in the volatility of our cost of funds. We believe it is important to maintain the financial health of your association. We also understand that many of you are facing financial stress in your businesses. At this time we believe that a 0.25% decrease is an appropriate balance between the needs of the association and your needs.
We considered making no decrease at all. But there have been recent signs that credit markets are beginning to improve, just slightly. As a result we felt confident enough to make a 0.25% decrease. We continue to monitor financial markets closely, and will make future adjustments as needed. Future adjustments may be either upward or downward.
While the current situation in the financial markets has affected our cost of funds, it has not to date affected the availability of funds to the Farm Credit System. We still have funds available to lend and we continue to make loans the same as always.
I continue to post occasional comments about the current financial situation on Yankee’s blog at www.yankeeaca.blogspot.com. You can also find links there to current financial information for Yankee and the Farm Credit System, which both remain strong.
Thank you for your continued support and patronage.
Sincerely,
George S. Putnam
President and CEO
