Irate depositors still affected by Maryland's six-month savings and loan crisis marched 1,000-strong on the State House today, assailing Gov. Harry Hughes for not releasing funds still frozen at three thrifts and promising to channel their anger into political muscle during next year's election.
In their largest and most vocal demonstration, furious depositors from the Washington and Baltimore areas stood under a light rain, facing the Georgian State House as speaker after speaker railed against Hughes and other politicians whom they hold responsible for the thrift crisis.
"We're mad and we vote!" the depositors chanted repeatedly as Hughes met in his second-floor office with three representatives of the Maryland Savings and Loan Depositors Committee. They demanded that the governor give account holders at three thrifts where deposits are frozen -- Old Court, Community, and First Maryland savings and loans -- access to their funds by Christmas.
Hughes, while expressing concern for the hardships endured by the more than 100,000 account holders at the three thrifts, rejected their demand that he immediately use money in a state-controlled insurance fund to begin paying off depositors.
"Basically, his answer was no," reported David Lange, a leader of the group, to the demonstrators outside the State House, who responded with loud boos and cries of "Impeach him!"
Following his meeting with depositors today, Hughes said an immediate release of state-controlled insurance funds to pay off depositors would "delay matters in solving the problems of First Maryland and Community" because the state might need to use some of the money to encourage acquisitions of the thrifts by banks or other institutions.
Today's demonstration came as the Hughes administration enters another crucial period in its efforts to dig out from under the savings and loan crisis touched off in May by reports of mismanagement and alleged wrongdoing at Baltimore's Old Court thrift, which has now been placed in receivership.
Within the next few weeks, the administration will face critical tests that could have a major impact on the political future of Hughes, who is expected to run for the U.S. Senate next year.
At First Maryland Savings and Loan of Silver Spring, where accounts have been frozen since late August, a 30-day ban on withdrawals will expire Thursday, and state officials have said that the thrift could be forced into conservatorship if it does not qualify for federal insurance by then. Federal auditors said recently that First Maryland must raise $40 million to qualify for coverage by the Federal Savings and Loan Insurance Corp. (FSLIC).
One senior administration aide said today that a forced conservatorship of First Maryland by early in the week "is a very real option." Conservatorship would most likely be followed quickly by a receivership that would make it easier for the state to offer the thrift to an out-of-state banking institution.
In addition, a New York bond rating house is expected soon to reaffirm or downgrade Maryland's AAA bond rating, a key indicator of fiscal health that the state has held since 1940. Any lowering of the bond rating would cost Maryland taxpayers millions of dollars in added interest costs associated with borrowing for state construction projects.
While faced with the continuing problems of Community, which is under conservatorship, and First Maryland, the administration has been distracted by the furor that followed the disclosure three weeks ago that Hughes was warned in October 1984 of impending problems in the thrift industry.
News accounts of the warning, contained in a memo from a Hughes adviser, George Liebmann, inflamed the depositors.
As an indication of Hughes' political problems, The Baltimore Sunday Sun published a poll showing the governor trailing badly behind one of his expected challengers for the democratic Senate nomination. The poll of 404 registered Democrats showed Rep. Barbara Mikulski leading Hughes 38 percent to 18 percent, with Rep. Michael Barnes at 16 percent. The poll's margin of error was 5 percentage points.
In a September poll, Hughes and Mikulski ran almost equal in a trial heat against U.S. Sen. Charles McC. Mathias Jr., the Republican incumbent who has since announced he will not seek reelection.
In an irony of history, Hughes -- who swept into the governorship in 1979 on a wave of revulsion against political corruption in Maryland -- was characterized by several demonstrators' signs today as corrupt himself.
"Mandel. Agnew. Anderson. Alton. Hughes. It's gotten worse," read one sign that named the governor along with past officeholders convicted of political corruption. Another sign referred to the savings and loan crisis as "Annapolisgate," and featured photos of Hughes and President Nixon. Under Nixon's photo, it read, "What tapes?" Under the governor's, it read, "What memo?"
Many political insiders who once considered Hughes the clear favorite to win the Democratic primary for U.S. Senate next September are adjusting their political calculations in the wake of the Liebmann memo.
"I think Harry becomes an attorney next year," said one legislator today, reflecting the belief in some quarters that Hughes will eventually choose not to run for the Senate.