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

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That’s according to a cease and desis t order issued against bythe , a federal bank First Marblehead (NYSE: FMD), whosr key business of packaging student loanse into securities has dried up, now facese the prospect of pumping millionsw of dollars of capital into the small Rhodr Island bank to bolster its capital. The OTS order says First Marblehea is required to maintaina $30 million deposig at the bank until it is sold or the bank’sx concentration of private student loans is reduced to 50 percentr of Union Federal’s capital, plus any allowance for loan First Marblehead also needes OTS approval before making any golden parachutew payments to senior executives, accordinbg to the cease and desisf order.
Union Federal Savings Bank’sx problems have been chronicled in previoux stories by the BostonBusiness Journal. Beforse being acquired by First Union Federal Savings hadabout $40 million in But that balance sheet ballooned to more than $600 millio n last year as First Marbleheadf moved some $500 million in riskhy private student loans onto the bank’z balance sheet. The bank has been unsuccessful in sellingt those loans while an escalating number of defaults have triggeresdlarge losses. In the first for example, the Nortn Providence-based bank lost $26.4 million, according to federa l bank filings.