Gov. Harry Hughes, in his attempts to resolve the savings and loan crisis in his state, has proposed that all privately insured Maryland-chartered S&Ls apply for federal insurance. The governor's action is a product of crisis management.

But it also shows his acknowledgement of a reality that some privately insured Maryland S&Ls recognized months ago when they applied to the Federal Savings and Loan Insurance Corp. for deposit insurance.

Switching to FSLIC insurance is no panacea for Maryland's thrifts, however. Qualifying for FSLIC insurance is one thing. Sustaining strong assets and viable loan portfolios are entirely different matters, as the performances of many of the nation's federally insured S&Ls will show.

The Federal Home Loan Bank Board is forecasting a profitable year for the savings and loan industry, but that silver cloud has a dark lining.

The savings and loan industry has been treading water since the late 1970s, and the outlook for many institutions isn't very good. To be sure, the problems many federally insured S&Ls are experiencing today are different from those that devastated the industry in the late 1970s and early 1980s. Nonetheless, the industry remains troubled. And troubles in the industry have increased concern among federal regulators over mounting pressures on the FSLIC fund.

Indeed, the chairman of the Federal Home Loan Bank Board, which regulates federally chartered S&Ls, remains concerned about excessive growth in the industry. Bank Board Chairman Edwin J. Gray underscored that concern recently in citing "skyrocketing deposit growth" that has led to "too many highly questionable, highly speculative, highly risky investments with the prospects for high losses in all too many cases."

Maryland's privately insured S&Ls are currently the focus of national attention because of alleged unsound management practices uncovered at a few state-chartered institutions. The practices in question aren't unique to Maryland, however. Gray continues to have a deep concern about federally insured institutions that continue to ignore prudent loan underwriting and investment standards "in their quest for instant profits at the expense of longer term viability, safety and soundness."

The bank board proposed legislation in March that would put more muscle into the FSLIC's authority to deal with risk. The proposed legislation would authorize the FSLIC to assess flexible insurance premiums based on the risk posed to the insurance fund. The bank board followed that up earlier this month with an additional legislative proposal that would limit the powers of FSLIC-insured, state-chartered institutions to those permitted for federally chartered institutions.

Even if Congress decides to incorporate those proposals in a bill, risk is not the only source of concern. The strength of the industry and its ability to compete in a new arena are. Battered by severe earnings losses between 1980 and 1982, the savings and loan industry really never recovered fully, notwithstanding broader lending and investment powers it received since then.

Five years ago, the industry was caught in the grip of high interest rates, heavy withdrawals and loan portfolios ladened with low-yield, long-term fixed-rate mortgages. The problem then was earnings. The problem today is the quality of assets, which is "more expensive to resolve," according to a bank board official.

Deregulation, which was supposed to put the S&Ls on a "level playing field," hasn't worked for a large segment of the industry. Many S&Ls simply weren't equipped -- some still aren't -- to play on the new field, where they were given expanded lending and investment powers. A lack of management expertise to administer new powers in many instances, and a raft of sour loans in real estate and commercial ventures, make it impossible for many S&Ls to compete on any kind of field.

The industry's thin capitalization and continued vulnerability to interest-rate swings "has inevitably aggravated strains on the FSLIC," according to Gray. At least 25 percent of FSLIC-insured institutions were operating in the red at the end of 1984, and estimated net income was only $1.7 billion, compared with $2 billion in 1983.

The industry this year will have its best earnings performance since 1979, nevertheless, according to the U.S. League of Savings Institutions. "The problem is that a number of institutions are experiencing record losses while others are doing very well," said Brian Smith, associate director of research at the U.S. League. "Interest rates are going lower, but what's coming back to haunt people are the poor loans they made," Smith noted.

It's the quality of those loans that keeps coming back to haunt the industry, and the continual decline of its net worth that is putting pressure on the FSLIC. And even though the FSLIC seal on an S&L's door bolsters confidence among savers, it's not necessarily the salvation of management.