On one level, Maryland's 7 1/2-month savings and loan crisis has showcased the best qualities of Gov. Harry Hughes as he nears the end of his eight-year tenure and prepares a quest for a seat in the U.S. Senate.
Hughes' calm demeanor and deliberate management style have been well suited to digging out of a problem whose complexity and duration make it the most challenging test faced by any governor in recent Maryland history. Despite repeated setbacks and frustrations since May, Hughes and his staff have doggedly marched toward their goal of getting federal insurance for the larger thrifts and finding buyers for the most troubled associations.
On another level, however, the thrift crisis -- both in state government's failure to anticipate and prevent it and the administration's handling of it since May -- plays to Hughes' primary political weakness: the perception that he reacts rather than leads.
One longtime Democratic activist said the savings and loan crisis serves to "crystalize" for average voters what "insiders and political junkies" have accused the governor of being for years: "a passive, nonassertive kind of guy, who's never been in command."
"Hughes can recover from savings and loans," added the activist, "but he can't recover from the perception of weakness. He doesn't have a political base that he can remobilize."
Ten months before the Democratic U.S. Senate primary in which Hughes will probably face three opponents with strong geographic or ideological bases of support, the savings and loan crisis is a political disaster for the governor. Whether Hughes can rebound is one of the most intensely debated questions in Maryland politics.
Stung by the editorial reaction to reports that he had been warned seven months in advance of the thrift crisis of widespread self-dealing in the industry, hounded by angry depositors and mired in distant second place in the public opinion surveys, Hughes is fighting for his political survival.
A study by the University of Maryland Survey Research Center released yesterday shows that evaluations of Hughes' job performance have fallen in the last year. Forty percent of the 401 state residents polled rated Hughes' performance as "excellent" or "good" -- compared with 54 percent of those questioned in the fall of 1984 or spring 1985 -- and 50 percent said his performance was fair. The survey has a sampling error of 5 percentage points.
Just three short years after he swept to landslide victories in the gubernatorial primary and general elections, Hughes is regarded as severely damaged goods by many political insiders.
"I think he has immense problems," said one Baltimore figure who has been closely associated with Hughes' past campaigns. "He has to face the question of how he can restore himself politically. I don't know if he can or not. At this point the odds are against him."
Many political insiders believe that Hughes has been injured by his low profile during the crisis. The governor himself, last interviewed about the thrift crisis by The Washington Post in late October, declined to be interviewed for this series of articles, according to his press spokesman.
The governor and his aides have worked virtually nonstop on the thrift crisis since May, yet that fact has not been conveyed because the governor has remained closeted in his office, emerging to meet the press only when there is good news to report.
"When FDR came into office," noted a former political confidant of the governor, "the news was awful. But he talked to the people and it had a soothing effect."
Two events have appeared particularly damaging for the governor, the October 1984 memo from an administration adviser warning Hughes of insider dealing at some thrifts, and the governor's refusal during an October 1985 press conference to share in the responsibility for the crisis.
Yet even those who believe that Hughes has been badly damaged by the thrift crisis acknowledge the possibility that, given time, he may recover.
Since the collapse of Old Court in May, Hughes has made steady, if slow, progress in resolving Maryland's savings and loan problems. Of $6.7 billion in deposits in 102 state-chartered associations that were restricted by Hughes' executive order in May, almost 80 percent are now available to account-holders. All but three of the 25 thrifts that must have federal insurance by the end of this year will probably meet the deadline, and of the three, the administration said it expects to soon have buyers for two, Community and First Maryland.
That would leave Old Court, which is under receivership and being liquidated, as the only major financial disaster. The potential loss at Old Court has been estimated at $175 million, most of which would be covered by the industry insurance fund now controlled by the state. How much the state will have to pay to peddle Community and First Maryland is unknown, but estimates of Community's eventual losses range from $60 million to $120 million, depending on whether it is severed from its bankrupt real estate subsidiary.
Hughes' political career has always been blessed with fortunate timing. In 1978, a front-page editorial in The Baltimore Sun in the waning days of his first campaign for governor catapulted Hughes from a distant challenger to the State House. In 1982, a successful legislative session erased the impression that Hughes was ineffectual and cleared the way for an easy reelection campaign.
In 1986, timing may be the governor's trump card again. By the time the campaign begins in earnest next spring, Hughes may have put the savings and loan crisis to bed, enjoyed a fruitful last legislative session, and emerged reborn.
"If you still have sick institutions and depositors' money held up, Harry can forget it," said Del. Timothy F. Maloney (D-Prince George's). "But if the three sick institutions are taken care of and depositors get their money back, people will be worried about the Orioles and their mothers-in-law."
Hughes' legendary luck already appears to be taking hold. An unexpectedly large budget surplus will make paying for the thrift crisis far less painful, with no need for a tax increase or a bond issue. The state's AAA bond rating, regarded as gravely threatened just a few weeks ago, may yet be preserved.
Nathan Landow, a prominent Democratic fund-raiser whose own loyalties are torn between Hughes and one of his challengers, U.S. Rep. Michael D. Barnes, is one who doesn't yet count the governor out.
"Up to date [the savings and loan crisis] has had some repercussions," said Landow. "But I think that could very easily turn around if some positive things take place. . . . If it happens shortly, he'll have enough time to show what he's done. . . . Then we'll have a race."