Maryland Gov. Harry Hughes said today his administration would accelerate its planned pay-back of frozen deposits at the defunct Old Court Savings & Loan to give nearly half of the thrift association's customers all of their money by March 31.
Under Hughes' revised distribution plan, the accounts of 17,103 depositors, equaling about $26.4 million, will be transferred to the giant Maryland National Bank and freed by March 31. Each of those accounts is worth $5,000 or less.
Meanwhile, the $569 million in accounts of Old Court's 17,394 other customers will remain under state control, but those depositors may withdraw as much as $5,000 at the end of March. If all large depositors take advantage of that distribution, the state will have to pay out $86.9 million, said Hughes.
The funding for the total $113.3 million release in March will come mainly through the controversial transfer of $100 million that now is in the state's transportation trust fund. Although some suburban legislators have been angered by the transfer because they felt it could halt some local projects, legislation allowing it is moving rapidly through the General Assembly. The state Senate approved a bill today that would guarantee a fund reimbursement on a 37-to-6 vote.
The state is trying to liquidate Old Court, whose collapse last May triggered the thrift crisis, and has tried for months to sell off Community and First Maryland savings and loans of Montgomery County. More than 110,000 customers at the three failed thrift associations have virtually no access to their $1.2 billion in deposits, but the pay-out plan applies only to Old Court.
Hughes' use of the transportation trust money was a major element of the first depositor pay-back plan proposed by the governor on Jan. 10. Under that formula, Old Court depositors would have received up to $100,000 of their money in quarterly payments, starting with a $50 million distribution this March and ending in December 1989. The governor's announcement today means that the second payment this year, which had been scheduled for August, will be combined with the March payment.
The quarterly payments, which the state still intends to make to holders of Old Court's largest accounts, will be funded through the sale of Old Court assets by the Maryland Deposit Insurance Fund (MDIF), the state agency that controls the Baltimore association.
Hughes also announced today that he would request legislation to give Wilbur D. Preston Jr., the special state-appointed investigator of the S&L crisis, new powers to subpoena the private financial records of several figures in the financial debacle.
Preston, who recently filed a mammoth report blaming the disaster on government and private industry, was to conclude his investigation by March 1. Hughes' bill would extend the inquiry until May to give Preston the opportunity to recommend additional civil or criminal actions "against those responsible for the crisis," the governor said.
Hughes, appearing upbeat at an afternoon news conference, described his revised distribution formula as a "people-oriented pay-out plan" and "another major step toward solution of the S&L problem."
MDIF Director Melville S. Brown said the new plan "takes a lot of the pressure off" the Hughes administration by paying a large number of Old Court depositors so quickly. But, Brown added, the relief plan does not eliminate the nagging problem of how to raise cash to fulfill the rest of the pay-back by 1990.
"We have taken a calculated risk," he said. "We'll be helping the most people we can as quickly as we can."
Daniel G. Finney, a spokesman for Maryland National Bank, said the bank has agreed to pay the state government a premium on accounts that remain at the bank.
As an incentive to large account-holders at Old Court, Hughes offered to start paying simple interest, at an undisclosed rate, on those deposits if the customers decline the $5,000 payment in March. Interest on Old Court accounts has been frozen since Nov. 8, when the thrift was placed in receivership.