Aides to Gov. Harry Hughes assured skeptical members of the House of Delegates today that negotiations over the long-pending sale of Community and First Maryland savings and loans, which would relieve the state of enormous financial liabilities, are nearing an end.
In another development, Baltimore lawyer Wilbur D. Preston Jr., who investigated the origins of the savings and loan crisis at the behest of the legislature and Hughes, sharply criticized a key component of proposed S&L regulations pending in the Senate.
His criticism prompted the Senate leadership to draft an amendment to eliminate what Preston has described as loopholes that could permit a recurrence of the practices that caused the crisis.
The sales of Community and First Maryland have been frustrated for months by lingering regulatory and economic issues, and the Hughes administration is under increasing pressure to deliver the details of the proposed S&L sales to the General Assembly before the legislature adjourns in three weeks.
Many of Hughes' recent optimistic predictions about closing the deals were repeated today.
"We are very much at the end," said Robert H. Winter, an attorney for the Maryland Deposit Insurance Fund who appeared at a briefing for House Speaker Benjamin L. Cardin (D-Baltimore) and other delegates. MDIF has controlled Community, a Bethesda S&L, and First Maryland of Silver Spring since September and November, respectively.
The collapse of the two associations, which followed the demise of two large Baltimore savings and loans last year, represent not only a financial liability of more than $200 million, but also a political millstone for Hughes, a probable candidate for the U.S. Senate. In the face of persistent federal objections and continued haggling over the terms of the sales, Hughes has expressed confidence that Community will be sold to a financial institution from Pennsylvania and First Maryland to a large savings and loan in Baltimore.
Winter announced today that the state also is negotiating with a second prospective buyer of First Maryland, an unidentified group of Washington area business persons who he said recently submitted a proposed contract to acquire the distressed thrift.
Privately, aides to Hughes disagreed sharply over merits of the new offer on First Maryland. One official described it as "serious and financially strong," while another said the offer "can't compare" with a rival acquisition proposal by Yorkridge-Calvert Savings and Loan of Baltimore.
Cardin and other House leaders remained skeptical of the administration's assurances today that First Maryland and Community will soon be sold.
"It seems like every time we talk there's another regulatory problem," said Cardin, a Baltimore Democrat.
"I am just very leery on this federal approval process," Cardin added.
Replied Thomas H. Maddux, a Hughes cabinet secretary and key negotiator on the transactions: "You have every reason . . . for your skepticism."
Preston's objections to the proposed S&L regulations were contained in a letter dated Monday, in which he complained to the Senate leadership about its version of the regulatory bill spawned by his investigation.
Preston, who has called repeatedly for state government to get out of the business of overseeing savings and loans, took issue with the Senate's plan to shield associations with assets up to $40 million from several tough new regulations. The protection would lead to an "administrative nightmare" and pave the way for abuse by "a number of small associations which have started on that course," Preston said.
Preston's letter prompted Senate leaders to draft an amendment today that would shield only the state's smallest associations -- those with less than $15 million in assets -- from the new regulations.
In another development, Baltimore Circuit Court Judge Joseph H.H. Kaplan, who is presiding over the state's stewardship of four crippled thrifts, has ruled that the Maryland government is immune from legal challenges to its management of the savings and loan crisis.
Kaplan ruled Monday against Chevy Chase Savings and Loan, which filed suit against MDIF to recover about $82 million it had paid to two funds the S&L industry has established for reserve and insurance purposes.