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"The recent performance of the American economy, characterized by strong growth and low inflation, has been exceptional--and better than most anticipated...." -- Federal Reserve Chairman Alan Greenspan, testifying before a House banking subcommitteeEDITED BY PAT WECHSLERReturn to top

OFF WITH SALLIE MAE'S HEAD?

DISSIDENT SHAREHOLDERS OF the Student Loan Marketing Assn. (Sallie Mae) appear very close to achieving the impossible: winning a proxy battle against an entrenched management.

On July 31, shareholders will elect a new board of directors. Going in, the insurgents have the support of at least five large mutual funds controlling 39% of Sallie Mae's outstanding shares. Their already impressive strength was expected to be bolstered on July 24 when Institutional Shareholder Services was set to make a 180-degree turn on its previous support of Chief Executive Lawrence Hough and recommend that shareholders vote for the dissident candidates. Led by former Chief Operating Officer Albert L. Lord, the dissidents have been demanding a more aggressive pace as Sallie Mae privatizes from being a quasi-governmental--although publicly traded--entity that buys student loans from banks for its own portfolio or for resale to investors.

In recent days, Hough has pulled out all stops defending his turf--even persuading John Neff, the legendary Vanguard Group fund manager, to come out of retirement and join his management-backed slate. He also has vowed to resign if his slate is elected and has hinted at a further shakeup of top management.By Dean Foust EDITED BY PAT WECHSLERReturn to top

THIS GOP TAX DUEL IS AT 35,000 FEET

SPEAKER OF THE HOUSE NEWT Gingrich may be fighting off conspirators, but he hasn't lost his knack for leading a lobbying effort.

This time, the old friend of small business is on the side of the big corporations in a turbulent Hill fracas over whether major airlines or the small regionals should bear the brunt of planned hikes in the airline tax. The Georgian's allegiance isn't so startling, since Atlanta is home to Delta Air Lines. Defending regional and smaller national services, such as Southwest Airlines, is Senate Majority Leader Trent Lott (R-Miss.).

The Gingrich forces have already persuaded the Senate to drop its proposed levy on domestic legs of international routes--which would have raised taxes on the majors $1 billion over five years. And they likely will prevail with a Gingrich-backed plan to cut the airline tax from 10% to 7.5% while imposing a $2 per passenger fee for each leg of a flight. Analysts think this scheme would shift more of the burden onto smaller carriers. Whatever the solution, the industry seems destined to shoulder a large chunk of the new taxes needed to offset GOP cuts--about $3 billion extra over five years.By Mary Beth Regan, with Wendy Zellner EDITED BY PAT WECHSLERReturn to top

A SLIPPERY HOCKEY DEAL

JOHN SPANO'S $165 million purchase of the New York Islanders hockey team was unraveling long before his arrest July 23 on charges of bank and wire fraud--in fact, before the deal even closed.

In early April, Fleet Bank went to closing on an $80 million loan to the 33-year-old businessman. There was one problem, according to lawyers involved in the case: The bank never received the $7.6 million Spano was to put on reserve to cover future interest payments.

The team's owner, John Pickett, should have been paid $16.8 million that day as well. He signed off on the deal anyway, taking Spano's word that the money would be forthcoming. After all, Spano was the owner of Bison Group, a profitable heavy-equipment leasing company, and had never missed a payment on his mansion.

It is unclear when Fleet management discovered that Spano never paid up. One source claims it did not catch on until June. Fleet would not comment, but a spokesman did confirm that the bank only began demanding the money in early July.By Jeanne Dugan EDITED BY PAT WECHSLERReturn to top


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