JP Morgan Sues To End Sallie MaeDeal
CHICAGO - (02/18/05) -- JP Morgan Chase said Thursday itfiled suit in Delaware Chancery Court to dissolve the company'smulti-billion dollar student-loan venture with Sallie Mae. JPMorgan said it wants to protect the bank's brand and student loanbusiness. Under the eight-year-old deal, JP Morgan originates itsown branded student loans exclusively through the joint venture andSallie Mae purchases and services the loans. In its suit, JP Morgannotes at the time the venture was formed Sallie Mae was not in thebusiness of orginating its own loans. "Sallie Mae, however, hasdramatically changed its business model since the joint venture wasformed and has become an aggressive direct competitor to the (JPMorgan) brand that the joint venture was formed to promote," thebanking giant said. During the last two years Sallie Mae'sorigination volume has soared while the joint venture's volume hasstagnated. Sallie Mae was chartered as a government sponsoredenterprise in 1972 to create a secondary market for guaranteedstudent loans but since its privatization, completed just atyear-end, it has carved out a huge share, as much as 50%, of theorigination market, as well, in direct competition with many of thecredit unions and banks it was chartered to serve. Separately,Sallie Mae officials lobbied Pennsylvania state lawmakers for theirunsolicited $1 billion takeover offer of the Pennsylvania HigherEducation Assistance Agency during hearings Thursday before theHouse Apprpriations Committee.