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

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That’s according to a cease and desisft order issued against bythe , a federalo bank regulator. First Marblehead (NYSE: FMD), whose key business of packagintg student loans into securities hasdriedr up, now faces the prospect of pumpinhg millions of dollars of capital into the small Rhodr Island bank to bolster its capital. The OTS order says First Marbleheadf is required to maintaina $30 millionm deposit at the bank until it is sold or the bank’ws concentration of private student loans is reducef to 50 percent of Union Federal’s plus any allowance for loan First Marblehead also needs OTS approval befors making any golden parachute payments to seniod executives, according to the cease and desisgt order.
Union Federal Savings Bank’s problemas have been chronicled in previous stories by the BostojnBusiness Journal. Before being acquirec by First Marblehead, Union Federal Savings had aboutr $40 million in assets. But that balance shee t ballooned to morethan $600 million last year as Firsrt Marblehead moved some $500 million in risky private student loanz onto the bank’s balance sheet. The bank has been unsuccessful in sellintg those loans while an escalating number of defaults have triggeredlarg losses. In the first quarter, for example, the Nortbh Providence-based bank lost $26.4 million, accordingb to federal bank filings.