Maryland Gov. Harry Hughes has been advised that he must abandon part of his deposit distribution plan for Old Court Savings & Loan customers in order to comply with federal regulations.
The plan, which would have allowed Old Court customers to earn some interest on their deposits by agreeing not to withdraw the money for four years, could meet with opposition by the Securities and Exchange Commission, a Hughes aide said.
Ben Bialek, Hughes' chief legislative counsel, said Friday the governor was told last week by the state's bond counsel that it would be extremely difficult to issue depositors debentures, or notes, in lieu of their money without violating SEC regulations.
State officials said they are planning to announce formally that this portion of the deposit distribution plan will have to be dropped when they appear at a hearing Wednesday before Baltimore Circuit Judge Joseph Kaplan.
Under the governor's repayment plan unveiled Jan. 30, the state would begin March 31 to distribute to Old Court's 34,000 depositors money frozen in their accounts since June 7, 1985 -- one month after the state's savings crisis began.
Practically all Old Court depositors would be allowed to withdraw up to $5,000. Depositors having more than that amount would receive the balance of the payment over the next four years.