company over to a group of dissidents who want to compete with banks by lending directly to students. Stockholders voted 25.5 million shares to 18.5 million in favor of a directors' slate put forth by Albert L. Lord and his Committee to Restore Value. A separate vote on converting the government-sponsored enterprise to a private company was overwhelmingly endorsed. "We will deliver service to schools and students at a level they have never known before," pledged Mr. Lord, who succeeded Lawrence Hough as Sallie Mae's chief executive officer upon completion of the vote. "Some of the banks are our competitors and some are our partners. We know the difference, and as we proceed, you will know the difference as well," Mr. Lord said. Speaking to reporters after the vote, Mr. Lord said he expects Sallie Mae-formally the Student Loan Marketing Association-to begin lending directly to students. But he did not specify when or in what volume. "Our objective is to acquire student loans at the most efficient price possible," he said. Banks "are big boys, they can compete. If their concern is that we can deliver service that's too good, well I hope they say it loud enough so that their customers can hear it." More than 900 commercial banks and thrifts participate in the government-guaranteed loan program, originating $20 billion of loans last year. Bankers in the business oppose Sallie Mae's new direction. "They're a damn big, nationwide competitor and I don't like it," said W. Clark McGhee, senior vice president of student lending, Crestar Bank, Richmond, Va. "If this was ABC bank moving in down the street, that would be one thing," he added. "But for decades Sallie Mae has been able to build a very large infrastructure on the backs of the taxpayer." Jon A. Veenis, president of Norwest Student Loan Center, Sioux Falls, S.D., said Sallie Mae has a leg up on banks because of its size, vast sales force, and extensive servicing systems. "They're going to be a formidable competitor," he said. Still, several bankers were confident about taking on the $48 billion- asset student loan concern. "It may not be a totally fair match-up, but I think we'd be able to compete with them," said Scott Dueser, president and chief executive of the $550 million-asset First National Bank of Abilene, Tex. "At a bank like ours, a student can come in and talk to the same person every time, not some "800" number." Others predicted that Sallie Mae will not be as successful as banks in developing close relationships with small schools. "That's an advantage we can hang on to for awhile," said Lamar Ball, chief executive and chairman of First State Bank of Texas, Denton. The $1 billion-asset institution makes about $30 million in student loans annually to students at small institutions such as the University of North Texas and Texas Women's University, Mr. Ball said. But even these relationships could be threatened by Sallie Mae, he added. "Especially because of the advent of electronic commerce, their tight pricing is going to get to the heartland eventually, and that will hurt us." Sallie Mae also will be paying less for loans originated by banks, Mr. Lord said. Currently, Sallie Mae pays banks approximately 2% of the value of a loan. Mr. Lord said he intends to cut that fee in half within five years. That could convince banks to hold student loans in portfolio, securitize them, or sell them to other, smaller, nonprofit loan acquirers, Mr. Veenis noted. "There are certainly other liquidity options banks can look to." Thursday's vote was the culmination of a long fight. Congress last October gave Sallie Mae permission to shed its government-sponsored status and become a private firm. The law also required the government to liquidate the company by 2013 unless half the shareholders approved a privatization plan by March 1998. Sallie Mae and the dissident shareholders fought to a draw in May after neither side's plan for the concern's future garnered enough votes to prevail. However, a strong endorsement last month by Institutional Investor Services, an independent proxy advisory firm, tipped the scales in favor of the dissident shareholders. Edward A. Fox, Sallie Mae's new chairman, said the revamped board will meet after Thursday's vote is verified, probably early next week. William Arceneaux, departing chairman, told shareholders he intends to "cooperate with the newly elected board to achieve a smooth transition."

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