Maryland has now declared a short pause before it takes up any further legislation on the savings and loan associations. There are now several hundred federal bank examiners at work on the books of the S&Ls in the private deposit insurance system. Gov. Harry Hughes and the leaders of the legislature want to see what the examiners find before deciding what remedies to put together.
In the meantime, the governor is moving promptly to restore S&Ls to normal operations as rapidly as the examiners declare them to be sound. He is also lifting the limits selectively from certain types of accounts on which they could cause unusual hardships -- payroll accounts, for example. The idea is to do whatever can be done to allay the sense of jeopardy that makes financial panics spread. The governor is trying to restore an atmosphere as close to normal as possible while the examiners complete their work.
The state government needs the examiners' answers to two large questions before it goes much further. It needs to know the extent of the losses that unwise management and, perhaps, theft have inflicted on the Old Court Savings and Loan Association. Next, it needs to know whether any other S&Ls are in a similar condition.
One way to deal with an insolvent S&L is to turn it over to an out-of-state bank that agrees to meet its debts -- or some of them -- as the price of being allowed to do business in the state. The traditional prohibitions against interstate banking are rapidly dissolving, and the troubles of the S&Ls are accelerating that process. The state of Ohio is rescuing the depositors of the failed Home State Savings Bank that way. Maryland's ability to strike similar bargains with out-of-state bankers may be limited by the law passed earlier this year giving them other and perhaps easier ways to come into the state.
Further legislation will probably be necessary to protect depositors. But before he drafts it, Gov. Hughes wants to know more precisely the size of the losses that are going to have to be covered and where they occurred. Policy is going to have to wait, briefly, while the examiners finish their job.