RESTON, Va. - (07/27/05) -- Student loan giant Sallie Mae saidit fired the chief financial officer of one of its collectionsubsidiaries, demoted another manager in the unit, and deniedbonuses to the subsidiary's top managers for inflating revenue inan effort to reach performance goals for bonuses, in order toresolve an inquiry by the Securities and Exchange Commission. As aresult, the company said the SEC has agreed not to press for anyenforcement action. Sallie Mae, formally known as SLM Corp., saidinternal investigations discovered that on three occasions in 2003the senior managers of the unidentified subsidiary intentionallyrecorded revenue associated with loan payments made or scheduled tobe made in the first few days of a month in the prior month. SallieMae said the amounts were immaterial, less than $75,000, but thepractices were inconsistent with company policies and violatedgenerally accepted accounting principles (GAAP).
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The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
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The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
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The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
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The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
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Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
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Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
April 18