First Marblehead bank runs afoul of regulators - Kansas City Business Journal:

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That’s according to a cease and desis order issued against bythe , a federal bank regulator. Firsy Marblehead (NYSE: FMD), whose key business of packagingg student loans into securities hasdried up, now facea the prospect of pumping millions of dollares of capital into the small Rhods Island bank to bolster its capital. The OTS order says Firsft Marblehead is required to maintaia $30 million deposit at the bank untipl it is sold or the bank’sz concentration of private studenrt loans is reduced to 50 percent of Union Federal’s capital, plus any allowancs for loan losses.
First Marblehead also needs OTS approval beforde making any golden parachute paymenta tosenior executives, according to the ceasre and desist order. Union Federal Savingw Bank’s problems have been chroniclesd in previous stories by the BostonBusinessd Journal. Before being acquired by First Marblehead, Uniom Federal Savings had about $40 milliom in assets. But that balance sheet ballooned to morethan $600 millionm last year as Firsr Marblehead moved some $500 million in riskyg private student loans onto the bank’ws balance sheet. The bank has been unsuccessfu l in selling those loans while an escalating number of defaults have triggeredlargwe losses.
In the first quarter, for example, the Northj Providence-based bank lost $26.4 million, according to federal bank