The Maryland House of Delegates without debate today unanimously passed sweeping legislation that would significantly tighten regulation of the state's savings and loan industry.
The 135-to-0 vote came 290 days after depositor runs on the Old Court Savings & Loan Association of Baltimore brought the $9 billion industry to the brink of ruin and plunged the state into a financial crisis from which it is still recovering. The measure was drafted by a special counsel appointed to investigate the state's savings and loan crisis and was introduced by the Hughes administration.
The legislation, which will undergo review by the Senate beginning Monday, is designed to correct what the special counsel's investigation determined was a wholesale failure by state government to control unscrupulous thrift owners. The probe alleged that association officers used depositors' funds to transform traditional institutions into highly speculative real estate investment companies.
Senate leaders predicted today that the bill would emerge from that chamber with only minor revisions, despite the muted complaints of savings and loan lobbyists who have protested that the measure is regulatory overkill.
If enacted into law, the legislation would vest in the state's chief savings and loan regulator broad new authority to control the investments of thrift institutions and sharply restrict their lending practices. The bill would transform the board of savings and loan commissioners into a purely advisory body, and give the savings and loan division director control over everything from an association's ownership to its advertising practices.
The House's swift review and approval of the 111-page bill before the midpoint of the 1986 General Assembly session was widely regarded as an inevitable response to constituents' anger at the failure of the state government to prevent the crisis. The special counsel's probe singled out the assembly's almost reflexive approval of industry-sponsored legislation in the past as a contributing factor in the crisis, which has left more than 100,000 depositors with no access to about $1 billion in funds.
"This bill looks like it's a vehicle to make amends for some of the misery people have been suffering the last 10 months," said House Minority Leader Robert R. Neall (R-Anne Arundel).
In a related matter, Gov. Harry Hughes signed legislation requiring the state to repay $129 million to a Transportation Department trust fund within four years. The bulk of that money -- $100 million -- was borrowed to pay for a four-year distribution plan to unfreeze deposits in Old Court Savings & Loan.
The major provisions of the bill approved by the House today include limits on investments by savings and loans, regulation of loans made to association officials and criminal penalties for violations.
Some legislators who have been frustrated because their role in digging the state out of the thrift crisis has been secondary to the Hughes administration's said passage of the tough regulatory bill allows them to campaign at home in the fall on a platform of accomplishment.
"The legislature always overreacts to a crisis, and that is happening here," said state Sen. Dennis Rasmussen (D-Baltimore County), chairman of the Senate Finance Committee, which will take up the measure.
Added Del. Gerard Devlin (D-Prince George's): "The horse having been stolen, the barn door is now firmly locked."