A provision buried in the giant spending bill that Congress is set to approve today would let Sallie Mae's parent affiliate with a financial institution.

The measure would exempt Sallie Mae, the secondary market maker for student loans, from a 1996 law that prevents joint ownership of government- sponsored enterprises and financial institutions. Though Sallie Mae converted to a private company last year, it still has a GSE subsidiary that must be phased out by 2008.

Under the provision, the secretary of the Treasury would have to approve the affiliation and could impose conditions on it. Sallie Mae's parent, SLM Holding Corp., also would have to dissolve its GSE arm within two years after completion of any deal.

The company could receive as many as two one-year extensions if the Treasury chief deems the extra time to be in the public interest.

House Banking Committee Chairman Jim Leach-who had opposed efforts to attach a similar exemption to other bills-did not object because of the limits in the latest version and a desire not to block the spending legislation, his spokesman said.

Banking industry officials said that they did not view the possibility of Sallie Mae's parent buying or being bought by a bank as a major threat because the company has found other ways to originate loans.

"They are already pretty much doing it," said Joe Belew, president of the Consumer Bankers Association. "Now they are going to private label it.

It's a branding issue."

Also, the nearly $500 billion appropriations legislation includes a provision that would prevent Freddie Mac from offering an alternative to private mortgage insurance for low-down-payment loans.

Lobbyists and Capitol Hill sources said that the spending bill does not contain any other banking-related provisions. The House was expected to approve the catchall bill Tuesday night, and the Senate planned to vote today before Congress adjourns for the year.

-Dean Anason

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