Word: marylands
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Customers at Maryland's privately insured S and Ls have been jittery since the Ohio crisis, withdrawing about $630 million in two months. But like Ohio's episode, which was touched off by the failure of Cincinnati's Home State Savings, Maryland's full-blown panic started with trouble at just one institution. The run began when press reports revealed that Old Court's president and part owner, Jeffrey Levitt, had stepped down under pressure from the insurance fund, which was worried about the thrift's sloppy management and overly rapid growth. In three years, Levitt had pushed the thrift...
That was not all. Maryland authorities contended that Old Court's top officers had engaged in such improprieties as giving themselves lavish consulting fees and writing at least $5.8 million in overdraft checks. Maryland's attorney general is conducting a probe of Old Court's management that could produce criminal charges...
...panic spread to Baltimore's Merritt Commercial Savings (assets: $339 million) following news reports that state regulators had asked the thrift to bolster its cash position by selling a 39-story downtown skyscraper it is constructing. Maryland authorities tried to restore confidence by placing both institutions under the wing of state conservators, but that failed to stop the runs from spreading to other privately insured thrifts...
...hour emergency session on Friday, the state assembly passed seven bills that give the Governor more power to regulate the state's thrifts and replace the old private insurance system. The new laws will require all Maryland S and Ls to obtain federal coverage within four years or close their doors. In case they need state help in the meantime, the legislators authorized a $100 million bond issue. To reduce Maryland's potential loss in rehabilitating the Old Court and Merritt thrifts, the state began negotiating their sale to such institutions as New York's Citicorp and Chase Manhattan...
Following the Ohio episode, Maryland's crisis may have dealt a fatal blow to private insurance in the rest of the country. While 83% of U.S. thrifts are federally insured, 30 states allow at least some of their banks, thrifts or credit unions to rely on private coverage. Many institutions that are small or in a hurry to grow prefer local insurance funds because they tend to be less strict than federal regulators. Old Court, for example, was able to boast money-market accounts with interest rates of up to 11%, compared with about 8.5% offered by federally insured thrifts...