Beltway Blues Slam Sallie

Sallie Mae (SLM Quote) plunged 11% in midafternoon trading after the student lender said its private equity-led buyer warned that legislation pending in Washington could scuttle the $25 billion deal.

The group told Sallie the legislation "could result in a failure of the conditions to the closing of the merger to be satisfied." Sallie said it "strongly disagrees" and "will take all steps to protect shareholders' interests."

Sallie didn't specify which legislation the group -- led by private equity shops J.C. Flowers and Friedman Fleischer & Lowe, and including J.P. Morgan (JPM Quote) and Bank of America (BAC Quote) -- was taking issue with.

But the White House on Tuesday threatened to veto a House of Representatives bill that would slash subsidies paid to student-loan companies such as Sallie, Citigroup and BofA, Reuters reported.

Legislators and regulators also have been cracking down recently on alleged conflicts of interest across the student lending industry. Numerous lenders have settled with New York authorities by agreeing to pay into a borrower education fund.

Sallie agreed this past spring to go private in a $60-a-share deal.

Shares fell $6.65 Wednesday to $51.15.