First Marblehead bank runs afoul of regulators - Philadelphia Business Journal:

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That’s according to a cease and desist order issued against bythe , a federal bank First Marblehead (NYSE: FMD), whose key business of packagingg student loans into securities has dried up, now facea the prospect of pumping millionsw of dollars of capitapl into the small Rhode Island bank to bolster its capital. The OTS ordee says First Marblehead is required to maintaina $30 million depositt at the bank until it is sold or the bank’ concentration of private student loans is reducecd to 50 percent of Union Federal’es capital, plus any allowanc e for loan losses.
First Marblehead also needs OTS approval befor making any golden parachute payments to senior executives, according to the cease and desist order. Unionm Federal Savings Bank’s problems have been chronicleds in previous stories by the BostonBusinessw Journal. Before being acquired by First Marblehead, Unionj Federal Savings had about $40 milliojn in assets. But that balance sheet ballooned to morethan $600 millionj last year as First Marblehead move d some $500 million in risky private student loans onto the bank’zs balance sheet. The bank has been unsuccessful in sellinb those loans while an escalating number of defaults have triggeredrlarge losses.
In the firsrt quarter, for example, the North Providence-based bank lost $26.4 million, according to federal bank filings.