Maryland Gov. Harry Hughes signed into law today legislation enacted on Tuesday that enables Chase Manhattan Corp. to acquire the crippled Merritt Commercial Savings and Loan Association and two other state thrifts.
The Federal Reserve Board approved Chase's application to buy the three savings and loans later in the day. The Federal Reserve, the nation's central bank, regulates all companies that own banks and its approval was needed for the rescue of the ailing Maryland savings and loan associations.
Today's bill signing, coming after two weeks of tumult in the state capital during which the state Senate nearly killed the legislation, paves the way for Chase to begin commercial banking operations at the three thrifts' 13 branches in Baltimore, Annapolis and suburban Washington on Nov. 1.
"We settle with Chase on Thursday, and we open as Chase Bank of Maryland on Friday," said Arthur Silber, president of Chesapeake Savings and Loan Association of Annapolis, which also was acquired along with Friendship Savings and Loan of Bethesda.
Hughes said today that Friendship and Chesapeake would be removed on Monday from a 20-day ban on withdrawals imposed on Oct. 17, but would remain under a withdrawal limit of $1,000 per month per account until they are converted to Chase branches. At that time, some $500 million in deposits at the three thrifts will become fully accessible to 70,000 account-holders at the three thrifts, some of whom have had no access to their funds since June.
Hughes, after the brief ceremony outside his State House office, announced that he had obtained some additional pledges from Chase yesterday and today, fullfiling a promise he had made to the Senate to exact additional concessions from the New York banking giant.
Hughes said Chase agreed to:
*Extend a $5 million line of credit to the Maryland Deposit Insurance Fund to help the state agency that oversees the thrift industry to implement a hardship program that will allow some depositors at Old Court and Community savings and loans to withdraw some of their money frozen since the thrifts were placed into conservatorship.
*Pledge $25 million worth of credit to loan programs run by the Department of Economic and Community Development, including housing, day care, and minority assistance programs. Hughes said that assistance would save the state "hundreds of thousands of dollars" in bond processing costs.
*Waive its origination fee for processing student loans originating in Maryland.
*Contribute a minimum of $100,000 to charitable and philanthropic causes in the state beginning in 1986.
Hughes, kissing the legislation he had signed, called the new law permitting the Chase acquisitions a "big step" in his administration's effort to contain the damage from a five-month thrift crisis.
"We've significantly narrowed the problem down to three associations," Hughes said, a reference to Community, Old Court, and First Maryland. The last thrift is operating under a withdrawal freeze and trying to win federal insurance after takeover negotiations with Citicorp fell through. "We look forward to solving those in the next few weeks."
The governor also outlined further changes to another key component of the transaction, the state's assignment to Chase of its right to sue Merritt owner Gerald S. Klein. The legislature had balked at that provision.
Hughes said today that the state retains the right to exercise its claims, but only after Chase has itself sued Klein or after Klein has repaid the debts he owes to the bank.