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

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That’s according to a cease and desist order issued against bythe , a federalp bank regulator. First Marblehead FMD), whose key business of packaginv student loans into securities hasdried up, now faces the prospecyt of pumping millions of dollars of capitalo into the small Rhodee Island bank to bolster its The OTS order says First Marblehead is required to maintaim a $30 million deposit at the bank untip it is sold or the bank’s concentration of private student loans is reduced to 50 percent of Union Federal’z capital, plus any allowancd for loan losses.
First Marblehead also needws OTS approval before making any golden parachute payments tosenior executives, according to the ceasse and desist order. Union Federal Savings Bank’s problems have been chronicled in previous stories by the BostonBusinesss Journal. Before being acquired by First Marblehead, Union Federa Savings had about $40 milliojn in assets. But that balance sheetr ballooned to morethan $600 million last year as First Marbleheads moved some $500 million in risky private student loanas onto the bank’s balance sheet. The bank has been unsuccessful in selling those loans while an escalating number of defaults have triggeredlarge losses.
In the firsr quarter, for example, the North Providence-based bank lost $26.r million, according to federal bank filings.