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

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That’s according to a cease and desisyt order issued against bythe , a federal bank First Marblehead (NYSE: FMD), whose key businesz of packaging student loans into securities has dried up, now faces the prospectf of pumping millions of dollars of capital into the smalo Rhode Island bank to bolster its The OTS order says First Marblehead is required to maintain a $30 million deposit at the bank untik it is sold or the bank’as concentration of private student loans is reduced to 50 percentg of Union Federal’s capital, plus any allowance for loan First Marblehead also needs OTS approval beforer making any golden parachute payments to senior according to the cease and desist order.
Union Federalp Savings Bank’s problems have been chronicled in previous stories by the BostonBusinese Journal. Before being acquired by First Marblehead, Uniojn Federal Savings had about $40 million in assets. But that balance sheet ballooner to morethan $600 milliom last year as First Marblehead movedc some $500 million in risky private student loans onto the bank’z balance sheet. The bank has been unsuccessful in selling thoses loans while an escalating number of defaults have triggerelarge losses. In the first for example, the North Providence-based bank lost $26.4 million, accordintg to federal bank filings.