Critics say Senate Health, Education, Labor and Pensions Chairman Judd Gregg (R-N.H.) faces a potential conflict of interest involving his wife just months before his panel is set to reauthorize the Higher Education Act.
Less-established companies looking to Congress to help them cut into Sallie Mae’s student lending business fear they will not get a fair hearing from Gregg because of his wife’s ties to the student loan giant, and government watchdogs at the U.S. Public Interest Research Group are raising a red flag.
Allegations about a potential conflict arose because Gregg’s wife, Kathleen MacLellan Gregg, sits on the Student Loan Marketing Association board — the government- chartered subsidiary of Sallie Mae. One of Gregg’s former chiefs of staff, J. Bonnie Newman, also has a seat on that board.
“It’s an appearance issue, not a substantive one,” HELP panel spokesman Josh Shields said in response to questions about the potential conflict.
“We think that it’s a problem,” said Ivan Frishberg, senior legislative advocate with the State Public Interest Research Groups. “Sallie Mae has a lot of issues before the Congress and Sen. Gregg’s committee in particular.”
Chris Horner, a senior fellow with the Competitive Enterprise Institute — a free-market think tank — suggested that Gregg should recuse himself from issues involving Sallie Mae.
“He’s a stout defender of them,” Horner said, charging that Gregg is “overtly protective of” Sallie Mae.
Gregg said that he was not aware of such concerns and that he would “absolutely not” recuse himself from issues affecting the quasi-governmental Fortune 500 company that specializes in student lending.
Student loan programs are regulated by the HELP Committee, and the rules are spelled out in the Higher Education Act.
Horner cited two examples in which Gregg’s staff interjected themselves in Sallie Mae matters.
A few weeks ago, Sen. Dick Durbin (D-Ill.) offered an amendment to the Fair Credit Reporting Act that would have required Sallie Mae to report customers’ loan information to credit bureaus.
Gregg’s staff asked Durbin’s staff to hold off on their amendment until next year, citing a desire to deal with all such issues at once during reauthorization, according to Gregg’s office, adding that the Senator had no problem allowing Durbin to proceed.
Ultimately Durbin withdrew the amendment after winning assurances from Sallie Mae, in writing, that the company would do what he asked voluntarily, Durbin said.
Durbin added that he honored Senate Banking, Housing and Urban Affairs Chairman Richard Shelby’s (R-Ala.) request not to raise issues that fall under other committees’ jurisdiction during the FCRA debate.
Jurisdiction was the key word again when Rep. Ralph Regula (R-Ohio) floated the idea of repealing the so-called “single-holder” rule, which some observers believe favors Sallie Mae and big banks, through an appropriations amendment.
Gregg’s staff had “jurisdictional” concerns about the amendment, preferring it be handled next year during the reauthorization process, according to Shields.
Gregg also has concerns about legislating on an appropriations bill, Shields added.
That being said, Gregg leans toward repealing the single-holder rule, Shields said.
Shields said the complaints are much ado about nothing and insisted his boss is “willing to oppose Sallie Mae.”
Sallie Mae privatized in 1997 and changed its name from the Student Loan Marketing Association, leaving that as the government-sponsored enterprise subsidiary of the parent company now known as SLM Corp.
Sallie Mae would not disclose how much its board members are paid, but U.S. News & World Report put the figure around $20,000 annually.
Kathleen Gregg was appointed to the board by President Bush in 2001.
While refusing to disclose the salary, citing past protocol, a spokesman from Sallie Mae pointed out that Kathleen Gregg is not the first Senatorial spouse to serve on one of Sallie’s boards.
Sen. Patrick Leahy’s (D-Vt.) wife, Marcelle, was on the same board during part of the Clinton administration, he said.
Conflict of interest charges are nothing new on Capitol Hill.
Former Sen. Phil Gramm (R-Texas) refused to back off issues affecting the now-bankrupt Enron Corp., despite his wife’s lucrative spot on the company’s board.
Likewise, former Goldman Sachs Group executive Sen. Jon Corzine (D-N.J.) did not step away from what ultimately became the Sarbanes-Oxley Act, despite its direct impact on financial institutions and his continued holdings in the Wall Street goliath.