Note: another example of capitalism's driving need to centralize and concentrate capital in fewer and more private hands at the miserable expense of everybody else. In this case: workingclass and "middleclass" students and their families.

"...Not only is concentration of wealth a direct product of capital accumulation, but centralization of capital (redistribution of capital - mergers, etc.) accelerates the tendency toward monopoly. As Marx pointed out, “Centralization in a certain line of industry would have reached its extreme limit, if all the individual capitals invested in it would have been amalgamated into one single capital. This limit would not be reached in any particular society until the entire social capital would be united, either in the hands of one single capitalist, or in those of one single corporation,� (Vol. I, Capital[/i], Kerr Edition, p. 689).

The centralization of capital is one of the centripetal forces in the accumulation of capital. There are other, centrifugal forces which inhibit the realization of the absolute limit, discussed by Marx in Volume I and in more detail in Volume III."

http://www.marxists.org/history/etol/document/swp-us/weissonmc.htm

"...A fall in the rate of profit and a hastening of accumulation are in so far only different expressions of the same process as both of them indicate the development of the productive power. Accumulation in its turn hastens the fall of the rate of profit, inasmuch as it implies the concentration of labor on a large scale and thereby a higher composition of capital. On the other hand, a fall in the rate of profit hastens the concentration of capital and its centralisation through the expropriation of the smaller capitalists, the expropriation of the last survivers of the direct producers who still have anything to give up. This accelerates on one hand the accumulation, so far as mass is concerned, although the rate of accumulation falls with the rate of profit....
...This divorce of requirements of production here, and producers there, is inseparable from the nature of capital. It begins with the inauguration of primitive accumulation. (Vol. I, chap. XXVI), becomes a permanent process in the accumulation and concentration of capital, and expresses itself finally as a centralisation of already existing capitals in a few hands and a decapitalisation of many (a change in the method of expropriation)." Capital Vol. III, Part III, Chapt. XV--

http://www.econlib.org/library/YPDBooks/Marx/mrxCpC15.html

---------------------------------
also see: http://www.humanities.mq.edu.au/Ockham/y64l06.html


April 16, 2007

Negotiators Say Sallie Mae to Be Sold for $25 Billion

[size=3]Sallie Mae is both a lender and a debt collector, making profits on both sides of its loans. Last year, the company earned $1.2 billion and generated a lot of cash that makes it attractive to private equity buyers.

By ]http://topics.nytimes.com/top/reference/timestopics/people/s/andrew_ross_sorkin/index.html?inline%3dnyt-per');][size=3]ANDREW ROSS SORKIN and ]http://topics.nytimes.com/top/reference/timestopics/people/l/jennifer_8_lee/index.html?inline%3dnyt-per');][size=3]JENNIFER 8. LEE

Sallie Mae agreed late last night to be sold to ]http://topics.nytimes.com/top/news/business/companies/morgan_j_p_chase_and_company/index.html?inline%3dnyt-org');][size=3]JP Morgan Chase, ]http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline%3dnyt-org');][size=3]Bank of America and two private equity firms for $25 billion, said people involved in the negotiations.

The deal would move the nation’s largest education lender, officially known as the ]http://www.nytimes.com/mem/MWredirect.html?MW%3dhttp://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp%26amp;symb%3dSLM');]SLM Corporation, into private control amid increasing turmoil for the company. The deal is expected to be announced today, these people said.

The other two private buyers are New York-based firms which have until now have kept a relatively low profile: J.C. Flowers & Company and Friedman Fleischer & Lowe. Together, the two firms will control 50.2 percent of the company, while the banks will own the rest.

Under the terms of the agreement, the two banks are going to provide Sallie Mae with up to $200 billion of backup financing to guarantee that the company can continue to make low-cost loans in the event that its access to capital, whether through the federal government or through private markets, becomes limited.

Under the terms of the deal, they said, the buyers will pay $60 a share in cash, which represents almost a 50 percent premium over Sallie Mae’s battered share price before news of a potential buyout was reported in The New York Times last week. The share price has surged nearly 15 percent on the prospect that the company could be bought out.

For Sallie Mae, which originates nearly 23 percent of student loans, this deal may be a salvation at a time when its business model has been under attack from several directions. All the uncertainty has caused Sallie Mae’s stock to plunge more than 20 percent over the last year, making it a takeover target.

The purchase of Sallie Mae represents the increasing willingness of private equity firms to step into highly regulated and scrutinized industries as they clamor for larger deals. Earlier this year,

[size=3]]http://www.nytimes.com/mem/MWredirect.html?MW%3dhttp://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp%26amp;symb%3dTXU');]TXU, the largest power producer in Texas, agreed to be sold to a group of private equity firms in a deal valued at $45 billion. That deal, which faces significant government hurdles in Texas, is seen a test for how traditionally free-wheeling private equity firms are able to maneuver the tight corners of government regulation. The purchase of Sallie Mae is likely to raise similar scrutiny from legislators and consumer advocacy groups.

Sallie Mae is both a lender and a debt collector, making profits on both sides of its loans. Last year, the company earned $1.2 billion and generated a lot of cash that makes it attractive to private equity buyers. Even so, some Wall Street analysts believe that it is a poor candidate to be saddled with debt because its business relies on razor-thin interest margins and the use of derivatives to manage its exposure to interest-rate swings.

The private equity firms are essentially placing a bet that the legislative debates will ultimately fall in Sallie Mae’s favor, even if the outcome is likely to mean reduced federal subsidies. The theory is that Sallie Mae’s larger scale and lower operating costs will still give it an advantage over its competitors. Currently, the company is carrying $142 billion in private and guaranteed loans on its books, about 27 percent of American student loans in the United States.

While 85 percent of its business is currently federally guaranteed, the company could also shift into the higher-interest and faster-growing market for private loans, which unlike guaranteed loans, is not subsidized by the government.


Eric Dash contributed reporting.

[size=3]-----------------------------------
]http://www.nytimes.com/ref/membercenter/help/copyright.html');][size=3]Copyright 2007 ]http://www.nytco.com/');]The New York Times Company

====================================

April 15, 2007
Another Lender Will Settle With N.Y. Attorney General, ReportSays

Education Finance Partners, a student-loan company that New York’s attorney general

http://chronicle.com/daily/2007/03/2007032302n.htm[size=3] for allegedly paying colleges illegal kickbacks to steer students to its loans, will pay $2.5-million to settle the state probe, according to an article to appear in Monday’s ]http://www.nytimes.com/2007/04/16/education/16direct.html');]New York Times, which cites unnamed lawyers involved in negotiations between the company and the state.

The settlement, which the Times says is expected to be announced on Monday, is the third between the New York attorney general, Andrew M. Cuomo, and a lender in connection with a wide-ranging, six-month-old investigation of cozy ties between student-loan companies and college officials that

http://chronicle.com/daily/2007/03/2007031601n.htm[size=3]an unholy alliance.�

In addition to the $2.5-million penalty, Education Finance Partners agreed to stop a series of practices that reward colleges for signing up their students as borrowers, the Times reported.

Sallie Mae, the nation’s largest student-loan provider, ]http://chronicle.com/daily/2007/04/2007041202n.htm');][size=3]reached a similar settlement last week in which it agreed to pay $2-million. A week earlier, Citibank, another major lender, ]http://chronicle.com/daily/2007/04/2007040301n.htm');][size=3]also settled with Mr. Cuomo’s office.

Several colleges and universities have ]http://chronicle.com/daily/2007/04/2007040402n.htm');]agreed to pay money they have received from revenue-sharing agreements with lenders to the students who took out loans covered by the deals. —Andrew Mytelka

---------------------------------------
Social Activism is not a hobby: it's a Lifestyle lasting a Lifetime
http://blackeducator.blogspot.com
---------------------------------------