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Determination of the 2006 Fiscal Year Interest Rate on Rural Telephone Bank Loans

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Rural Telephone Bank, USDA.


Notice of 2006 fiscal year interest rate determination.


In accordance with 7 CFR 1610.10, the Rural Telephone Bank (Bank) cost of money rate has been established as 5.49% for all advances made during fiscal year 2006 (the period beginning October 1, 2005 and ending September 30, 2006). All advances made during fiscal year 2006 were under Bank loans approved on or after October 1, 1992. These loans are sometimes referred to as financing account loans.

The calculation of the Bank's cost of money rate for fiscal year 2006 is provided in Table 1. Since the calculated rate is greater than or equal to the minimum rate (5.00%) allowed under 7 U.S.C. 948(b)(3)(A), the cost of money rate is set at 5.49%. The methodology required to calculate the cost of money rates is established in 7 CFR 1610.10(c).

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Jonathan P. Claffey, Deputy Assistant Governor, Rural Telephone Bank, STOP 1590—Room 5151, 1400 Independence Avenue, SW., Washington, DC 20250-1590. Telephone: (202) 720-9556.

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The cost of money rate methodology develops a weighted average rate for the Bank's cost of money considering total fiscal year loan advances, debentures and other obligations, and the costs to the Bank of obtaining funds from these sources.

Dissolution of the Bank

At its quarterly meeting on August 4, 2005, the Board of Directors (the “Board”) approved a resolution to dissolve the Bank. On November 10, 2005, the liquidation and dissolution process was initiated with the signing by President Bush of the 2006 Agriculture Appropriations bill, which contained a provision lifting the restriction on the retirement of more than 5 percent of the Class A stock held by the Government.

In accordance with the Board's resolution and the terms of the Loan Transfer Agreement between the Bank and the Government, dated August 4, 2005, the Bank's liquidating account loan portfolio (the portfolio of Bank loans approved before October 1, 1992) was transferred to the Government on October 1, 2005. As a result of that transfer, there are no more advances of liquidating account loan funds.

The dissolution of the Bank will not affect future advances of financing account loan funds. Requests for financing account advances will continue to be processed by employees of USDA Rural Development's Telecommunications Program, just as they were while the Bank remained in operation. The terms and conditions of the financing account loans will not change, nor will the method for determining the interest rates, including the determination of the cost of money rates after the end of each fiscal year. The only significant change to the financing account advances is that beginning October 1, 2005, Class B stock in the Bank is no longer being Start Printed Page 69201purchased with financing account loan advances.

Sources and Costs of Funds

Due to the ongoing dissolution of the Bank, no stock of any kind was issued during fiscal year 2006. Issuance of debentures or any other obligations related to advances from the financing account during the fiscal year were $66,496,919 at an interest rate of 5.494%. The Bank's cost of money rate for advances from the financing account is provided in Table 1.

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Curtis M. Anderson,

Deputy Governor, Rural Telephone Bank.

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[FR Doc. E6-20255 Filed 11-29-06; 8:45 am]