The administration of Maryland Gov. Harry Hughes, after contending for months that First Maryland Savings and Loan would be rejuvenated soon, is scheduled to ask a state judge today to place the crippled Silver Spring thrift in receivership so that depositors may be repaid by 1990, according to government sources.
Lawyers for the Maryland Deposit Insurance Fund are supposed to appear before Baltimore Circuit Court Judge Joseph H.H. Kaplan at 2 p.m. today to seek the receivership, a necessary first step for the time-consuming liquidation of First Maryland.
If, as expected, Kaplan orders the receivership, interest on most of First Maryland's 35,083 depositor accounts -- reduced earlier as a way of protecting the thrift's shaky assets -- would fall to zero.
"This is not a prescription for the continued good health of First Maryland," said one state official.
Receivership for First Maryland would mean both added hardship for the association's customers, who have had virtually no access to their $281 million since last August, and a severe setback to Hughes' strategy for ending the crisis in Maryland's savings and loan industry, which has dragged on for more than a year.
The governor, a U.S. Senate candidate whose political advertisements portray him as an executive who brought the state out of its worst financial crisis, spoke reassuringly in late 1985 and early this year about a pending sale of First Maryland. But suitor after suitor rejected the acquisition of First Maryland after reviews of its loan portfolio showed debts conservatively estimated at $26 million.
In late May, the giant Yorkridge-Calvert Savings and Loan of Baltimore suddenly withdrew its offer to acquire First Maryland deposits when it appeared unlikely that U.S. government regulators would grant those accounts federal insurance.
Some state officials expressed guarded hope yesterday that a buyer could one day be found to assume some First Maryland accounts. But one source said the severe debt problems at the association have led "nobody to feel optimistic about prospects for a quick sale."
"The state had to bite the bullet and begin getting at least some money back to depositors," said the source, who spoke on the condition that he not be identified.
Old Court Savings & Loan of Baltimore, the association that sparked a depositor run on savings and loans in May 1985, already has afforded state insurance fund agency officials a grim blueprint for the liquidation of the real estate empires that a number of thrift officers built in the 1980s.
Kaplan ordered Old Court into receivership in November, and a $100 million loan from the General Assembly, coupled with the sale of some assets, has enabled the state agency to repay thousands of Old Court's smallest depositors.
Similarly, the agency plans to repay small account-holders at First Maryland -- about 65 percent of the depositor pool -- by the end of this summer if Kaplan grants the receivership, one official at the agency said yesterday. MDIF intends to mail letters today to more than 22,000 First Maryland depositors explaining the logic behind the receivership and the agency's repayment plan, the official added.
One key advantage of receivership for the state is that by slashing interest on deposits to zero, the government saves about $1.2 million in monthly payments, officials said.
Under the agency's tentative repayment plan, which must be approved by Kaplan, First Maryland depositors would receive up to $100,000 per account by 1990, the deadline by which Old Court customers are to regain their money, officials said.
Anne Cadman-Walker, an elderly Arlington County resident who has $30,000 frozen in First Maryland, said she was extremely displeased by the planned receivership.
"Some people think that Old Court depositors were the only ones who got the shaft, but so did we," said Cadman-Walker. "Harry Hughes is running all around the state saying he solved the crisis. He hasn't yet. Why didn't he use his influence to avoid this receivership?"
H. Robert Erwin, the attorney for a statewide group of S&L depositors, said he will ask Kaplan at the hearing today to grant First Maryland customers more time to determine whether they can devise their own plan to restore the thrift.
"We have some question whether the state has exhausted all reasonable attempts -- short of liquidation -- to free depositors' money," Erwin said.
Maryland government officials gave Erwin's plan little chance of success, saying receivership was the painful but crucial step for the partial return of some First Maryland deposits.
"We're doing this for a positive reason even though it's a negative action," said one official. "If we don't get the clock started on this process -- well, I don't want to think about that alternative."