Maryland Gov. Harry Hughes yesterday said he will cut short his trip to the Middle East and return home Monday to deal with the continuing crisis of Old Court Savings and Loan of Baltimore.
Efforts to restore the confidence of Old Court depositors suffered a blow Saturday when hundreds of irate savers who had waited for hours to withdraw their money were turned away empty-handed after the S&L's branches were shut down ahead of schedule. An Old Court spokesman said a computer breakdown made it impossible to process withdrawals.
Under intensifying pressure to find a solution to the Old Court crisis before the doors reopen Monday morning, savings industry leaders continued to meet in Baltimore last night with officials of the Maryland Savings Share Insurance Corp., which insures Old Court and 100 other state savings associations.
"At this point we're hopeful of resolving the situation by merging Old Court into someone else," said Charles H. Brown, director of the state of Maryland's Savings and Loan division. "Once you have a dirty name, you have to get rid of it to regain public confidence."
MSSIC was negotiating with at least two Washington-area savings associations to take over Old Court. Officials of John Hanson Savings & Loan of Beltsville confirmed that they are willing to acquire Old Court under certain conditions. Representatives of Chevy Chase Savings & Loan, a Bethesda association owned by multimillionaire real estate investor B.F. Saul II, also were involved in the talks.
If those negotiations fail, state officials are prepared to seek a court order appointing a conservator to take over Old Court, whose chairman Jeffrey Levitt was ousted last week by MSSIC. News that Levitt had been forced out set off a public run on Old Court. The S&L already had lost deposits as the result of fears raised about privately insured thrifts after the failure of the Ohio savings insurance plan two months ago.
State officials began preparing to put Old Court into conservatorship two or three weeks ago, said Thomas Maddux, Maryland secretary of Economic and Community Development, who is traveling with Hughes in Israel.
Hughes, in Israel on an economic development trip, returned from a visit to the Dead Sea area to find himself surrounded by reporters asking about the troubled savings and loan. A few hours later, Maddux issued a handwritten statement from Hughes saying, "After a full and successful week-long tour of Israel, Gov. Hughes has shortened his planned visit to Egypt from four days to one day because of the Old Court Savings and Loan problem." The visit to Egypt was to have been principally a vacation, privately paid for by Hughes.
The governor will meet with the U.S. Ambassador to Egypt on Sunday and return to Annapolis on Monday rather than Friday as originally scheduled, according to the statement.
The governor began receiving reports of the worsening problems of Old Court before he left, Maddux said, and had set the stage for a possible state takeover of Old Court. "Everything is ready if necessary, but nobody said it is necessary yet," he added.
State savings and loan division officials told a congressional committee on March 29 that "presently we do not have any associations that we feel have severe operating problems." Old Court's difficulties were already well known at that time, sources familiar with the situation said yesterday.
Maryland officials not only drew up court papers for appointment of a conservator but also authorized Attorney General Stephen Sachs to begin a criminal investigation of possible conflicts of interest at Old Court.
The Baltimore association, which reported assets of $840 million in January, grew rapidly after it was acquired by new investors in 1982. Baltimore real estate investor Levitt and Allan Pearlstein, a Pennsylvania shoe manufacturer, each own 41 percent of Old Court. Jerome Cardin, whose family once owned all of the association, owns the remaining 18 percent.
Old Court grew from $140 million in assets to more than $800 million in three years, drawing deposits from all over the nation by offering some of the highest interest rates in the country, paying as much as 3 percent more than federally-insured institutions.
Old Court lost $15 million in deposits on Thursday when the run began and more on Friday and Saturday.
By Saturday afternoon, the atmosphere outside the Randallstown branch, where the run began, had become tense.
After driving four hours from New York and waiting in line for five hours, Larry and Hannah Koenig were turned away without their money. "We're being treated like dirt standing here," she complained. "Old Court is treating us like animals."
An estimated 100 depositors camped overnight Friday in the parking lot of the suburban Baltimore office and others vowed to show up Sunday night so they could get their cash first thing Monday morning.
Fear that the run will not only continue Monday but could spread to other MSSIC-insured savings associations kept state officials meeting into the night Saturday.
Savings and Loan Division chief Brown said he doubted a solution can be found by Monday, which could force the state to take over Old Court. Industry leaders strongly oppose appointment of a conservator which would spread Old Court's problems on the public record.
So far little is known about the conflicts of interest under investigation by Sachs or the extent of Old Court's financial problems.
Jerry D. Whitlock, president of John Hanson Savings, said his firm's interest in acquiring Old Court depends on MSSIC providing protection against future losses as well as an immediate cash infusion. Both are standard forms of aid given by insurance funds to make it possible for a healthy institution to acquire one that is in trouble.
Officials of Chevy Chase Savings could not be reached for comment yesterday. Officials from Community Savings & Loan and Sharon Savings and Loan have also been involved in talks with state officials.
Both John Hanson and Chevy Chase have applied for federal insurance, which could draw the Federal Savings and Loan Insurance Corp. into the negotiations.o this report.