The Maryland Senate approved legislation today that helps clear the way for the reopening of the crippled Community Savings and Loan Association as a new bank in early May.
By two 45-to-0 votes, the Senate approved measures that are essential to the state government's proposed sale of the debt-ridden Community to the Mellon Bank Corp. of Pennsylvania, a giant bank holding company that is eager to establish a foothold in the Washington suburbs once served by the savings and loan.
A Mellon spokesman said from Pittsburgh tonight that his company will reopen Community early next month if federal and state banking authorities approve its pending applications. An aide to Gov. Harry Hughes said the bills approved by the Senate tonight will likely be signed into law by the end of this week.
"We're delighted," said Benjamin Bialek, Hughes' chief legislative officer, who nursed the Mellon legislation through a General Assembly that resisted the transaction several times in recent weeks.
Although the sale of Community, formerly based in Bethesda, would relieve the state of an enormous financial liability, the offer to pay Mellon $131 million in cash to assume the thrift caused problems for the legislation even before the bills were considered by the legislature.
State Senate President Melvin A. Steinberg (D-Baltimore County), a sometimes unpredictable lawmaker who briefly delayed the sale of three distressed thrifts to Chase Manhattan Corp. last fall, threatened to derail the Community sale.
Steinberg contended that the state was being asked to pay Mellon too much too quickly, while also having to pledge $60 million as additional security for future losses that Mellon might experience.
After Mellon mollified Steinberg by shaving the state's up-front cost and the pledge against future losses, the Baltimore Senate delegation threatened last week to block the transaction if Hughes did not provide millions of dollars in aid to the city.
In the end, the threat proved to be hollow. There was not a peep of dissent on the Senate floor this afternoon as Steinberg gaveled the bills through to unanimous approval.
"Nobody's happy with this transaction," Steinberg said after the vote. "We had two alternatives: sell Community or liquidate it. We took the lesser of the evils."
The two bills approved tonight create new powers for state officials dealing with the ongoing problems created by the state's savings and loan crisis and contained legal safeguards that Mellon insisted on having.
Under the terms of the Community sale, Mellon would reopen eight of the thrift's nine old branches in Howard, Montgomery and Prince George's counties as offices of the new Mellon Bank Maryland. Once the branches are open, more than 20,000 Community customers would have access to about $323 million in deposits that have been frozen since last September.
Community failed last summer when its real estate empire, known as EPIC, collapsed; most of the thrift's former officers are now the targets of criminal and civil actions launched by the state.
"I feel a tremendous sense of relief," said state Sen. Howard A. Denis, a Bethesda Republican whose district includes hundreds of Community depositors. "This is a sign to the federal government that we have our act together."
Denis and other legislators are hopeful that a final Community sale will pressure federal authorities to approve a similar deal for First Maryland, a crippled Silver Spring thrift that a Baltimore savings and loan is attempting to purchase.
Despite assurances by Hughes that the deal is imminent, federal authorities have indicated they are in no hurry to allow First Maryland to be sold.