At least twice within the past month or so, Maryland Gov. Harry Hughes has been urged to take steps to tighten the regulation of state-chartered savings and loan associations. Thus far, however, the governor has failed to take the lead in calling for immediate regulatory reform for the S&L industry.

According to recent published reports, a lawyer who is investigating matters that led to the current S&L crisis in Maryland has recommended that the governor issue an executive order to tighten state regulations governing savings institutions.

In early October, Sen. Stewart Bainum Jr. (D-Montgomery) developed a legislative package to improve regulation of state savings and loans. Bainum had hoped to obtain passage of his legislative proposals in the recent special session of the General Assembly, but the measures were killed in committee. "The governor wanted to focus on the Chase deal in the special session," Bainum said he was told.

The special session concluded with Hughes signing into law legislation that enabled Chase Manhattan Corp. of New York to acquire the financially troubled Merritt Commercial Savings and Loan Association and two other Maryland S&Ls. The Chase deal may have reduced the state's financial liability in the crisis, but it doesn't correct the regulatory inadequacies that spawned mismanagement and risky investments that produced the crisis.

The rationale for recommending changes in the state's regulatory structure seems obvious enough. "We should have done all we could during the special session to restore the confidence of depositors and prospective depositors," Bainum noted. "I don't think we should wait to be hit over the head a second time."

Bainum's proposals would have strengthened state regulation of savings and loan associations and forced Maryland-chartered S&Ls to disclose more financial information to depositors and prospective customers. The key proposals in the six-bill package would have:

*Required state-chartered S&Ls to obtain written approval from the director of the division of savings and loan associations before transferring assets to subsidiaries. Passage of such a measure would strengthen the authority of state officials to monitor unsound practices by insured thrifts, according to Bainum.

*Increased public participation on the industry-dominated Maryland Board of Savings and Loan Association Commissioners. With a majority of its members representing the savings and loan industry, said Bainum, "It is safe to assume that the board would have been less anxious to enact sweeping changes for fear of 'rocking the boat.' "

*Forced S&Ls periodically to disclose asset and loan information that would make depositors more aware of the institution's financial condition.

*Closed the "revolving door" through which banking officials "move freely from state regulatory positions to positions at private financial institutions and back again."

"Now is the time to act to prevent the problems that precipitated this year's savings and loan crisis and to restore confidence in state-chartered thrifts," Bainum declared before introducing the measures.

Obviously, the governor and Bainum's colleagues in the General Assembly disagreed. Even after locking up the Chase deal, they apparently didn't consider the need for regulatory reform urgent enough to extend the special session. Wait until the General Assembly convenes its regular session in January, they implied by their inaction.

At the outset of the current crisis, Maryland disbanded its old system of private insurance for state-chartered S&Ls and assumed responsibility for insuring deposits at 102 state-chartered associations. But the state assumed the role of insurer of last resort in a vacuum, failing to put in place the safeguards that are needed to protect depositors and taxpayers from wheeling, dealing and mismanagement at state-chartered S&Ls.

Replacing the Maryland Savings Share Insurance Corp. and setting deadlines for the bigger state-chartered S&Ls to obtain federal insurance are no substitutes for meaningful regulation by state authorities. Even if all Maryland-chartered S&Ls obtain federal insurance, regulation of those institutions will remain the responsibility of the state.

When asked by reporters recently about published reports that he was warned last year about "self-dealing" and "high-flying" investment activity at some state-chartered S&Ls, Hughes said he was misled by state regulators. "Everybody was assuring us we didn't have a problem," the governor insisted.

This time, everybody, including the governor, knows what the problem is and how the absence of tough regulations and enforcement contributed to it.