150 



Ms. Colon. To a limited extent. 



Mr. Penny. Are there limitations, the types of sales that 

 CoBank 



Ms. Colon. Yes. 



Mr. Penny. Do they have to be agricultural? 



Ms. Colon, Under our regulations, not only do they have to be 

 agricultural, we can only finance those commodities that are origi- 

 nated from our co-ops and, unfortunately, in the way of wood, there 

 are not a whole lot of wood co-ops nor are there a lot of co-ops in- 

 volved in meat. Therefore, we are unable to finance these commod- 

 ities to any great extent. 



Mr. Penny. It is primarily grain and dairy? 



Ms. Colon. Correct. And some others — high-value products like 

 fruits, nuts, vegetables. 



Mr. Penny. Should we put a limitation on the ability of foreign 

 financial institutions to participate in this program? And if so, 

 other than CoBank, who would benefit? 



[Additional information submitted by Ms. Colon follows:] 



I don't believe so. From a public standpoint, our primary interest should be to 

 make U.S. agricultural products as desirable as possible from the pxirchaser's stand- 

 point. If financing from a foreign bank helps achieve that goal, I don't think we 

 should object. Also, I believe there are international agreements that require the 

 U.S. to treat foreign and domestic banks in a similar fashion. And, of course, we 

 could not support 3ie idea of CoBank being discriminated against in a foreign coun- 

 try. 



Mr. Penny. If we put a limitation, would other American finan- 

 cial institutions step forward or is CoBank the only firm that has 

 any interest in this GSM program. 



Ms. Colon. I think when the program was introduced, there 

 were a lot of U.S. banks involved, but with certain defaults that 

 happened in certain countries, they have exited the program. 



Mr. Penny. There were defaults, but they had significant protec- 

 tion on those defaults. I mean, there must be defaults to CoBank 

 as well. Why haven't you gotten out of the business? If others have 

 exited the business, why is CoBank making money? 



Ms. Colon. Well, we have a funding source that is unique. 



Mr. Penny. In terms of the co-op, the ability of the co-op to se- 

 cure lower interest financing, as compared to private institutions? 



Ms. Colon. We fund ourselves by issuing bonds and discount 

 notes. We are not a bank of deposit. 



Mr. Penny. So that allows you to stay involved in an area that 

 might be more financially risky for a private bank. When I say pri- 

 vate, not that co-ops are not private, but they are structured dif- 

 ferently. 



Ms. Colon. Right. 



Mr. Penny. What about value-added commodities? And I know 

 of your involvement with dairy products, but there has been tre- 

 mendous amounts of testimony today about the growth of value- 

 added exports. And I am just curious to know what share of your 

 loans involve bulk commodities and to what extent you are financ- 

 ing value-added exports and what are the trend lines? Are we see- 

 ing a growth in the value-added arena as time goes by? 



Ms. Colon. Yes. Until the late 1980's, basically all of our financ- 

 ing was for bulk ag commodities. With the emphasis on high-value 

 products, we see an increase in the amount of dollars going to high- 



