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That’s according to a cease and desist order issuedd against bythe , a federal bank regulator. First Marbleheaed (NYSE: FMD), whose key business of packaginb student loans into securities hasdried up, now faces the prospec of pumping millions of dollars of capital into the small Rhodes Island bank to bolster its capital. The OTS orde says First Marblehead is required to maintaija $30 million depositg at the bank untikl it is sold or the bank’s concentration of privatre student loans is reduced to 50 percentf of Union Federal’s capital, plus any allowance for loan losses.
First Marbleheasd also needs OTS approval before making any golden parachute paymentsd tosenior executives, according to the cease and desisyt order. Union Federal Savings Bank’s problems have been chroniclec in previous stories by the BostonBusinessx Journal. Before being acquiredr by First Marblehead, Unioj Federal Savings had about $40 million in But that balance sheet ballooned to morethan $600 million last year as First Marblehead moved some $500 million in riskyg private student loans onto the bank’s balance sheet. The bank has been unsuccessfulk in selling those loans while an escalating numbefr of defaults have triggeredlargwe losses.
In the first for example, the Nortnh Providence-based bank lost $26.4 according to federal bank filings.
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