Maryland Gov. Harry Hughes, facing one of his toughest political tests in the severe savings and loan crisis, came under ferocious criticism from legislators today for not heeding an early warning about problems in the state's thrift industry.
Dozens of legislators, joining a chorus of thousands of angry depositors, professed outrage, incredulity or smug satisfaction over last Saturday's disclosure of an October 1984 memo that detailed industry-wide failings that the memo's author said could spell disaster for Maryland.
"The governor knew about the problem and did nothing about it," said state Sen. Thomas P. O'Reilly (D-Prince George's). "Clearly, that was a mistake and it was improper."
The legislators, speaking after a brief special session here today that was related to the thrift crisis, clamored for a more complete explanation of why Hughes and his government regulators failed to act more aggressively on the prophetic memo that warned Hughes of "self-dealing" by several "high-flying" savings and loan associations.
At a news conference yesterday outside the Victorian mansion he has occupied as governor for nearly seven years, Hughes said he forgot George W. Liebmann's warning when he asserted earlier this year that the state's thrift industry was sound.
Moments later, reflecting on the firestorm of criticism against his administration's handling of the Liebmann memo, Hughes added: "Well, you know, there's going to be plenty of time . . . to assess blame. I'm not going to get sidetracked right now by that."
But the governor, whose dream of becoming a U.S. senator next year is intertwined with the thrift crisis, is already sidetracked.
Early this morning, Hughes summoned the president of the Maryland Senate and speaker of the House of Delegates to his office to give them copies of Liebmann's memo and additional papers that, according to the governor, show that he was let down by the government regulators who reviewed Liebmann's warning.
The fragmented record of how the state bureaucracy reacted to Liebmann's warnings flatters no one. Charles H. Brown Jr., who was then the chief regulator of Maryland savings associations, said in his official reply that he agreed with some of Liebmann's concerns, but he made no strong recommendation to close the many loopholes in state law.
Frederick L. Dewberry, Brown's boss and one of Hughes' cabinet secretaries, told the governor's staff director last November in a letter that he was prepared to meet with Liebmann.
But that meeting never occurred, even though Ejner J. Johnson, the staff director, had earlier told Dewberry in a memo that "George's observations . . . call for more immediate solutions to regulatory problems."
The record of missed opportunities was seized this week by depositors, some demanding Hughes' resignation and others a federal investigation, two highly improbable events.
By latching on to the Liebmann memo as a sign of duplicity on Hughes' part, the depositors renewed their tide of anger -- and it washed ashore today in Annapolis.
"When I heard who the memo was from, I was shocked," said state Sen. Catherine I. Riley (D-Harford). "How can you ignore George? It wasn't somebody in the bowels of government. It was somebody on his Hughes' staff."
"The governor needs to make a full disclosure about this," said House Speaker Benjamin L. Cardin (D-Baltimore). "We need to have the full picture before us . . . to see who was wrong, who had what information when, and who should have acted."
The General Assembly was in session for about an hour this morning as a formality to continue monitoring the thrift crisis.
Complaints about the handling of Liebmann's warning are particularly irksome and painful to Hughes and his staff, who this time last week were exulting over their narrow legislative victory allowing the sale of three savings and loan associations, including the debt-ridden Merritt Commercial of Baltimore, to Chase Manhattan Corp.
In addition, the governor and his aides say publicity about the Liebmann memo distracts them from the real work at hand: Using patience and prudence to reduce the state's financial liability in the S&L crisis and free deposits as quickly as possible.
"They're hurt," said one government official of Hughes' inner circle. "They feel they're doing basically good things and getting nothing but bad press for their efforts."
Others, however, said any embarrassment -- and political cost -- Hughes may suffer is the price for relying too heavily on underlings.
"The governor is well-intended and honest, but he acts regrettably," said state Sen. Stewart Bainum Jr. (D-Montgomery), who has sparred with Hughes in the past. "I don't want to kick him when he's down, but reacting to crises is the wrong way to lead. This has been typical of him for the past seven years."