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Truth in Corporate Justice:
CONGRESS MUST END “UNDERWRITING” SALLIE MAE

A Three Part Series by Truth in Corporate Justice LLC
October 4, 2006

Distributed by WWFree Release Press™

TCJ SPECIAL SERIES
Part One of Three

SALLIE MAE EDUCATE... BUT WHO PAYS?

Is it possible that our education system could seriously hurt our economy? Read this series about the SLM Corporation (NYSE: SLM) and how you, the taxpayer, are not only paying student loans, but the accrued interest as well. Truth in Corporate Justice LLC (“TCJ”) presents this series that shows that you are SLM’s collateral.

What if millions of borrowers of federally backed “Sallie Mae” student loans decided not to pay—even for one day—their monthly payment? What if this occurred next month, right before the November elections? More and more people are defaulting on mortgages, becoming delinquent on credit cards and other loans. Health care costs continue to climb, while housing prices fell for the first time in a decade. For the first time in eleven years, the median price of previously owned homes fell as inventories increased to a number not seen in a decade. The price of employee health care coverage rose 7.7% so far this year. That is double the inflation rate and more than the increase in workers’ incomes. Truth in Corporate Justice LLC’s Chief Managing Officer, Neil Rothstein, commented, “[as] a recent graduate stated to me, ‘my priorities are in the present moment. My shelter, my health and my ability to feed myself take precedence over paying off a debt that I know is federally secured. Sallie Mae will still get paid.”

It is quite possible that private lending to students in our country’s higher education system could seriously hurt our economy. Sallie Mae states that it began to cut ties with the government starting in 1997 when it was privatized and fully cut ties in 2004 when it went public. If that is the case then why does it spend millions each year lobbying Congress?

The Student Loan Marketing Association

Sallie Mae was originally created in 1972 as a government-sponsored entity (GSE). The company began privatizing its operations in 1997, a process it completed at the end of 2004 when the company terminated its ties to the federal government. Congress established the Student Loan Marketing Association-better known as Sallie Mae as a private corporation, financed by private capital to ensure the financing of student loans. At the end of 2004, Sallie Mae went public as SLM Corporation. Sallie Mae owns or manages student loans for nearly 10 million customers and administers more than $11 billion in college savings accounts for 1 million customers through its Upromise subsidiary. It employs approximately 12,000 individuals at offices nationwide and manages $106 billion in federally secured student loans.

SOME FACTS YOU SHOULD KNOW

• Since 1995, Sallie Mae has yielded a 1,900% return (Standard & Poor’s 500 returned only a 228% gain in comparison).
   
• Sallie Mae has spent millions lobbying Congress to keep its practices legal.
   
• House Majority Leader John Boehner has received over $200,000 from Sallie Mae’s political action committee, thus making it doubtful that he would ever consider being hard on Sallie Mae.
   
• Sallie Mae owns some of the biggest debt collection agencies in the country making as much as 25% in commissions, which includes the collection of federal income taxes.
   
• Sallie Mae manages almost $127 billion in student loans (87% or $106 billion are federally insured).
   
• If a borrower defaults on their federally backed Sallie Mae loan, our government pays the full amount of the loan outstanding and the compounded interest that has accrued.

Our government set up a corporation that lent billions of dollars to students who have nothing other than a possible education to secure these loans. Our government itself secured not only the amount of the loan, but also the accrued interest. This company is now a public company trading on the New York Stock Exchange. If all borrowers with Sallie Mae loans decided to default, our government would have to use our tax dollars to pay off these loans. What if you found out that as a taxpayer you were paying off not only the principle loan amounts to a publicly traded company, but also the accrued interest? The fact is that you are and therefore, you should receive some sort of benefit in this Company.

Rothstein states that he does not advocate that people stop paying their student loans, but “it is unconscionable that we are enslaving those who desire a higher education while making the American taxpayer act as the underwriter. At least we should get some stock from the investment.”

IS SALLIE MAE REALLY INDEPENDENT?

Sallie Mae states that it has broken ties with the government. How is that possible when the loans are federally secured? If a loan becomes delinquent, SLM Corp. is repaid the principle amount of the loan and all of the accrued interest. Assuming that higher education is a good thing for our country, why in any rational, ethical mind would our elected officials believe that the payment of accrued interest should be the responsibility of the American taxpayer? The taxpayers of America should not be held responsible to pay a publicly traded company anything without receiving company stock or dividends. If the government has placed itself in a position that it must guarantee these loans, at the very least the money that has been paid in accrued interest should be redirected to social security benefits, our men and women in the armed forces or perhaps just given back to those who earned it. That is the American way.

As a public corporation, Sallie Mae is aggressive, highly profitable and a hit on the stock market. In reality, as one former student burdened by a Sallie Mae loan stated, “My friends and I used to joke about these loans. We wondered, why, if many of us already had impaired credit, did we ever bother to pay it off? The government will pay it off and what difference does it make?”

So, either the person who assumed the student loan pays this company that trades on the New York Stock Exchange or you, the taxpayer, bear the burden. Either way SLM assumes no risk. Taxpayers of this country are the collateral—the underwriters. Indeed, the United States Supreme Court has ruled that social security income can be taken away from a person who defaults on a Sallie Mae. Moreover, from 1999 to 2004, recently retired Company CEO Al Lord received a total compensation of $225 million and his replacement, Thomas “Tim” Fitzpatrick made $145 million. Over five years, not only did they make $370 million combined but got Boehner as well. Boehner is in a hard position, but perhaps a softer approach into the issue might be to merely secure the principle. On February 2, 2006, Boehner did not delay in taking over his new role as House Majority Leader. With the support (financially) of Sallie Mae, Halliburton, pharmaceutical companies and other energy companies, Boehner took away Tom Delay’s position as “top man” of the House’s GOP. DeLay, until then, had been the House Majority Leader but resigned amid scandal that he was involved in alleged financial corruption including alleged money laundering.

The Washington Post recently stated that Boehner had told them on September 29, 2006 that he had learned in the spring of 2006 of inappropriate “contact” between Mark Foley and a 16-year-old male page. The Post reported that Boehner stated that he then had told House Speaker Dennis Hastert about the matter. Boehner then contacted the Post and backtracked on whether he had told Hastert or not (see Washington Post, September 30, 2006, By Charles Babington and Jonathan Weisman). What will Boehner do when millions of students who borrowed from Sallie Mae and the American taxpayers realize that they lost an extreme amount of their income while he gained a great deal by playing with Sallie? (As for Halliburton, Boehner, one should note, has stated with regard to the Iraq situation, “It may not benefit our generation, but for our kids and theirs, this may be the greatest gift we give them.” Boehner opposed expanding access to the military’s TRICARE health insurance program to thousands of Reservist and National Guard members and he also voted against giving every service member serving in Iraq and Afghanistan a $1,500 bonus). Rothstein states, “We should not hold those in public office to a standard far above us, but we should not expect their integrity to fall beneath us.”

IS SLM’s GROWTH REALITY OR FICTION

The total assets of the Company grew from $64.6 billion in 2003, then to $84 billion in 2004 and $99 billion in 2005. This significant jump was due, for the most part, from growth in long-term assets. SLM, however, is not in the business of the financial underwriting of stock. Nevertheless, during the same years, net receivables shrank over $160 million from 2003 ($2.475 B) to 2004 ($2.316 B) and the 2005 level ($2.406 B) was still about $70 million shy of the 2003 level. So the student loan debt collection business during this period was not that great considering their collections activity. “Goodwill” went from about $1 billion in 2004 to about $773 million in 2005. In 2006, while these numbers continued to improve, it is directly related to rising interest rates. One must ask:

What if one day, all those with student loans took a pay day away from Sallie Mae? What would Congress do and what would Congress say? More to come…

ABOUT TRUTH IN CORPORATE JUSTICE LLC

Truth in Corporate Justice LLC (www.worldwidetree.org) is a limited liability company under the umbrella of the Worldwide Tree Group that scrutinizes, supports, and endorses law firms that adhere to and are dedicated to the highest ethical, competency and zealous advocacy in order to maintain integrity in our legal system. It has started the practice of “L.E.O.” or Litigation Ethics Oversight. The group consists of TCJ, the Global Governance Center LLC, and Class in Action LLP—WWT’s law center. Additionally, the Group will begin growing its unique Worldwide Tree Multimedia LLC. You may contact Truth in Corporate Justice LLC at (310) 459-2560 or (800) 610-4998 or Neil Rothstein (nrothstein@worldwidetree.org) directly at (619) 251-0887. TCJ is a limited liability company that will scrutinize, support, and endorse those law firms that adhere to TCJ’s ethical and competency standards in order to maintain the integrity of the legal system within the United States. TCJ seeks to empower anyone facing problems in our ever-changing world through education, access, guidance, networking, representation, and more.

TCJ also sponsors the website www.halliburtonsecuritieslitigation.com which is dedicated to updating the public on the ongoing securities litigation against Halliburton Corporation. Mr. Rothstein currently serves as Special Counsel to the Lead Plaintiff in the landmark case where it was proven that one lone voice can make a difference.

The Worldwide Tree Group is non-partisan with no political, religious or other affiliation except to bring together differing philosophies, views and backgrounds in order to find solutions to the many critical challenges that people are facing today. Any organization or person may join and take part in the offerings of the various companies within the WWT except those who or which supports or advocates violence or terrorism.