Maryland’s second-largest savings and loan association was put into the hands of a conservator Monday, and Gov. Harry Hughes cut short a trip to the Middle East to help maintain public confidence in the state’s thrift institutions.
Maryland officials moved to take control of privately insured Old Court Savings & Loan to halt heavy withdrawals from the S&L; that began Thursday following published reports of serious management problems at the rapidly growing institution.
Under an order issued early Monday by Circuit Judge Martin Greenfeld, Old Court’s day-to-day operations will be managed by Maryland Savings-Share Insurance, a private association that insures about 100 state-chartered thrift institutions.
The order also limits withdrawals by customers to $1,000 per month for each account. Despite the limit, lines of depositors anxious to pull money from their accounts were present throughout the morning at Old Court branches in the Baltimore area.
Meanwhile, papers filed in circuit court by state Atty. Gen. Stephen Sachs shed new light on Old Court’s situation.
Sachs, in his request for appointment of a conservator, said that Old Court “faces a liquidity crisis that will cause it to fail to meet its obligations and withdrawals.”
The document disclosed that the association has borrowed $50 million from the Federal Reserve since mid-March, exhausting its line of credit, and that the thrift will have trouble paying certificates of deposit and construction-loan commitments that will come due over the next three months.
The document also alleged that Old Court has broken numerous laws and regulations, including those concerning insider loans to owners of the association. It listed $5.8 million in unsecured loans to officers, directors and their family members and $5.7 million in overdrafts on checking accounts held by officers and directors.
Old Court’s two main owners, Jeffrey Levitt and Allan Pearlstein, who together own 82% of the thrift, did not return telephone calls seeking comment on the document.
Hughes returned to his office Monday morning after an overnight flight from Egypt. He plunged immediately into a series of briefings and meetings with aides and officials who have been working on the problem.
While there are no indications that any other state savings and loan associations are in trouble, Hughes’ aides are concerned that the crisis atmosphere surrounding Old Court might spread to other institutions. Hughes said his first priority is to “do whatever we can to protect the depositors.”
During the last few months, Old Court has been offering one of the highest interest rates in the nation on its money-market accounts.
Since it was purchased three years ago by Levitt and Pearlstein, the association has grown rapidly, increasing its assets from $140 million to $840 million.
State officials, who met throughout the weekend, spent much of the time trying to arrange for the merger or sale of Old Court to another savings and loan.
The Baltimore Evening Sun reported that a deal with Perpetual American Bank FSB, the largest thrift institution in the Washington area, was considered likely Sunday but that the three Old Court stockholders--Pearlstein and Levitt, each with 41%, and Jerome Cardin with 18%--balked at the payment they would have received.