PhillyDeals: Sallie Mae to create 2000 U.S. jobs, reverse outsourcing

SLM Corp. - Sallie Mae, the student lender - is among the most government-sensitive U.S. companies.

President Obama says he can save $4 billion by making loans directly to students, ending subsidies to middlemen like Sallie Mae and leaving them to survive on higher-cost private loans, and as collection agencies.

With that threat, and the general slowdown in the loan-investment market, Sallie Mae's stock has lost most of its value.

Chief executive Albert Lord shot back yesterday by offering something Obama's Democratic allies want: Jobs in their districts.

Lord came from his Reston, Va., headquarters to Pennsylvania to visit his company's Wilkes-Barre offices with U.S. Rep. Paul Kanjorski (D., Pa.), a power on the House Banking Committee, to announce Sallie Mae is firing its contract workers in India and the Philippines and shipping 2,000 jobs back to several U.S. sites "as soon as we can."

As part of the move, Sallie Mae will double its employment in Kanjorski's district, to around 1,200.

The move, Lord told me, will cost Sallie Mae $35 million a year, compared with hiring contractors in Asia. "We're still in cost-cutting mode. My directors looked at me funny," he told me.

But, Lord added, "I believe this will be $35 million spent on our franchise for the long term," not on the balance sheet, but in building "relationships with the communities" where Sallie Mae lends.

Is this as blatant as it looks? Politics "is not a principal consideration," Lord told me. If it works out that way, it's "a bonus."

Obama's budget "has an orthodoxy of going to direct government loans," instead of subsidizing lenders like Sallie Mae, Kanjorski told me. "I don't happen to agree with that." He said competition will keep government lenders sharp. And private companies should service the loans once they're made.

Sallie had followed Citigroup, JPMorgan Chase & Co., and other giant lenders in "outsourcing" work abroad. In case those other government-aided companies aren't getting the message, Kanjorski told me: "Hopefully other CEOs across America can make the same type of analysis" and move work back home.

Lincoln National Corp. has hired Goldman Sachs to look for buyers for its main Philadelphia-based business, Delaware Investments, according to two newsletters, Pension & Investments and Financial Times Ignites. Both cited unnamed investment bankers as sources for the information.

Delaware spokeswoman Ayele Ajavon declined to comment. The firm employs around 1,000 at its Market Street headquarters.

In a report last week, Citigroup Global Markets analyst Colin Devine estimated Delaware's value at around 10 times projected earnings, or roughly $150 million.

That's less than a third of what the company commanded last time it changed hands, in 1994, when the mutual fund business was still growing rapidly.

Citi's Devine called Ameriprise Financial Inc. a possible buyer. Ignites suggested one of the big mutual insurance companies. Philadelphia mutual fund consultant Burton J. Greenwald said bargain-hunting private-equity groups have been buying fund "families" for roughly 10 times earnings.

Delaware was one of the original U.S. mutual fund companies under the 1940 Investment Company Act. But Greenwalt says Delaware "missed out" on the industry's big growth because it took on so much debt after longtime head Adm. W. Linton Nelson and his partners sold it to an investor/ management group in 1988. It hasn't grown quickly under Lincoln, either, despite its relatively high-performing bond funds.

Nelson was a canny trader whose clients included corporate raider Saul P. Steinberg when he was going after Philadelphia's Reliance Insurance Co.

Nelson's proceeds from the 1988 sale now fund the $20 million-plus Grace S. & W. Linton Nelson Foundation, of Wayne, which donates around $1 million a year to scholarships and other youth programs, says Fred Aldridge, president of the foundation.