Maryland state officials and savings and loan executives yesterday tried to find someone to buy Old Court Savings and Loan as a last-ditch alternative to appointing a state conservator to take over the beleaguered Baltimore thrift institution.
As meetings continued last night, Ejner J. Johnson, chief of staff for Gov. Harry Hughes, said, "We're extremely optimistic. Mergers are on the table. They're under discussion, but it would be premature to discuss them publicly ."
The run for deposits by Old Court savers that began Thursday morning worsened after Attorney General Stephen Sachs revealed he had begun a criminal investigation of possible conflicts of interest and other possible wrongdoing.
Sources said there appeared to have been millions of dollars in insider loans at the association, which has assets of $840 million.
Old Court's depositors began lining up at 4 a.m. yesterday for their money at the Randallstown branch, where the run began, and there were long lines all day outside all but one of Old Court's seven branches in the Baltimore and Eastern Shore areas.
Officials refused to say how much money was withdrawn yesterday, but a source said Old Court lost about $15 million in deposits the day before.
Old Court offices stayed open late last night and were scheduled to be open today as officials tried to halt the run by assuring depositors they can have their money if they want it.
State officials moved quickly to intervene in Old Court's difficulties yesterday in an effort to halt the depositors' panic before it spread to other savings associations insured by the private Maryland Savings Share Insurance Corp. See related story, D1.
Pressuring MSSIC and savings industry leaders to find a healthy partner to take over Old Court, state officials warned that if necessary the state Savings and Loan Division would name a conservator to run Old Court.
Savings and loan executives reportedly feared that appointment of a conservator would raise rather than lower the anxieties of depositors.
Hughes, who is traveling in Israel, was briefed by telephone several times about the situation but has no plans to cancel his trip, said press secretary Lou Panos. "If he were to come back, it could be a signal, an unwarranted signal and an exaggeration of the true situation," Panos said.
Hughes' top aides met with officials of MSSIC and industry leaders in a closed-door meeting in Baltimore late yesterday to try to work out a solution to the Old Court crisis.
The meeting broke shortly before 10 p.m. MSSIC President Charles Hogg II, said only that, "Old Court continued to experience withdrawals and has been able to meet all withdrawals."
Sources familiar with the talks said the governor's staff warned that if MSSIC could not deal with the situation quickly, Hughes might call a special session of the legislature and require all Maryland savings associations to apply for insurance from the Federal Savings and Loan Insurance Corp.
The disclosure yesterday that Hughes had approved an attorney general's investigation of Old Court before he left for Israel last week "exacerbated the situation," said W. Thomas Gisriel, chairman of the state Board of Savings and Loan Association Commissioners.
Gisriel said Old Court is "not an insolvent association. There might be some management problems, but these runs are not called for. The headlines are causing people to be unreasonable."
Gisriel said the S&L commissioners at a regularly scheduled meeting Thursday discussed appointing a conservator but "the facts didn't warrant it at the time. The only reason I would see to put Old Court into conservatorship is to stop the unusual run."
Although state officials, MSSIC representatives and Old Court itself sought to downplay the seriousness of Old Court's problems, emerging details suggested the association is in deep trouble.
Old Court could lose as much as $800,000 on dealings with Bevill, Bresler Schulman Asset Management Inc., the New Jersey government securities dealer that collapsed last month, it was learned yesterday.
Old Court has publicly insisted it did not expect any loss from the Bevill, Bresler scandal, from which the District of Columbia government narrowly escaped.
Old Court lost money in March and April, sources familiar with its finances said, and suffered a massive outflow of deposits even before this week's run.
Since mid-March it has borrowed more than $50 million from the Federal Reserve Bank, which acts as a lender of last resort for all financial institutions, according to several sources.
Old Court had depended heavily on out-of-state savers seeking high rates, and that source of funds has begun to dry up since the collapse of the private Ohio insurance system two months ago. Until the Ohio fund was destroyed by the failure of one big savings and loan, five states had private S&L insurance plans.
Fear that other state insurance plans also might be vulnerable has led many savers to shift their accounts to banks and savings associations with federal insurance. Several of the biggest members of MSSIC have applied to switch to federal insurance, including Chevy Chase Savings and Loan, Second National Building and Loan and John Hanson Savings and Loan.
Since new owners took over three years ago, Old Court has grown from a family-owned business with assets of $140 million to an $840 million institution with customers and investments all over the nation. Until this week it was run by Jeffrey Levitt, a Baltimore real estate investor, and Allen Pearlstein, a Pennsylvania shoemaker, who together owned more than 80 percent of its stock.
Under pressure from MSSIC, Levitt this week was forced to relinquish control to John D. Faulkner, former president of Community Savings and Loan of Bethesda and a member of the MSSIC board. After The Baltimore Sun reported the management shakeup on its front page Thursday morning, Old Court customers began drawing out their savings.
Under Levitt, Old Court achieved its dramatic growth by paying some of the highest interest rates in the nation on deposits -- as much as 3 percent more than federally insured associations on some accounts.
Those high rates were one of several visible symptoms of Old Court's potential problems, savings industry sources note. Rapid growth has caused a number of savings and loans to fail.
Others have gotten into difficulty because of large direct investments in real estate and big loans to insiders, phenomena also seen at Old Court.
Attorney General Sachs said his office "is conducting an investigation of possible criminal misconduct in the general area of conflict of interest." Sachs has declined to be more specific, but other sources said there were "self-serving loans" to Levitt and other insiders.
A Baltimore lawyer who got his start in real estate as an inner-city landlord, Levitt in the past three years had become one of the whiz kids of Maryland finance.
According to the Baltimore Evening Sun, he was once shot by an irate tenant angry over broken plumbing.
Now he owns the Baltimore and Ocean City franchise for Gucci, the Italian maker of loafers and leather goods, said Stanford Hess, a Baltimore attorney.
Levitt and his wife last September purchased a $200,000 collection of pre-20th century silver from
Last December, Levitt bought about 25 percent of the stock of Altex Oil Corp. of Denver in partnership with Pearlstein and Jerome Cardin, the third partner in Old Court.
Jerome Cardin became chairman of the oil and gas exploration company, and the other two were named to its board of directors.
Levitt also owns a half-interest in Magill-Yerman, a Baltimore real estate firm.