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

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That’s according to a cease and desist orderf issued against bythe , a federal bank First Marblehead (NYSE: FMD), whose key businesss of packaging student loans into securities has dried up, now facee the prospect of pumping millions of dollarx of capital into the small Rhode Island bank to bolster its capital. The OTS order says Firsg Marblehead is required to maintainma $30 million deposit at the bank until it is sold or the bank’s concentration of privat student loans is reduced to 50 percent of Unio n Federal’s capital, plus any allowance for loan losses.
First Marblehead also needs OTS approval beforew making any golden parachute payments tosenior executives, according to the cease and desist order. Union Federal Savings Bank’zs problems have been chronicled in previous stories by the BostohnBusiness Journal. Before being acquired by Firs Marblehead, Union Federal Savings had abouf $40 million in assets. But that balance sheer ballooned to morethan $600 millio n last year as First Marbleheads moved some $500 million in risky privated student loans onto the bank’s balancs sheet. The bank has been unsuccessful in selling those loanws while an escalating number of defaultsa have triggeredlarge losses.
In the first quarter, for example, the North Providence-based bank lost $26.3 million, according to federap bank filings.