Evening star., 1962-10-17

interest rate, 10 transfer Cne1r
savings to newly organized
savings and loan institutions.
The money came from people
saving for retirement, young
sters saving for college educa-
tions and overseas military per-
sonnel saving for their return
to civilian life.
Then the bubble burst. AS
the State began looking criti-
cally at the booming, high-in-
terest, gift giving associations,
they found the underpinnings
unsafe. The associations book
keeping practices were Shoddy.
Some of the depositors' money
had been channeled into Specu-
llative, high-risk enterprises =
some of them outside the con-
ventional savings and loan
field.
4 RISKY businesses
The State found that some
associations had made loans to
purchase land at far above the
fair value of the properties,
with construction and develop
ment of Sprawling suburban
cities as the announced pur-
pose. State authorities discov-
cred that some associations had
sunk too much money into one
or two giant construction prof.
ectS whose failure would seri-
ously cripple, if not destroy,
their abilities to survive.
In some instances, share
holders money had been di-
verted into loans without ade-
quate security. And, some Of
these loans had been made to
subsidiaries or firms controlled
by the lending institution. In
at least one case, officials found
that exorbitant fees and sal
aries had been paid to persons
not on the firms payroll.
Less than one-fifth of Mary
lands 469 savings and loan as
sociations were insured by the
Federal Savings and Loan In
surance Corp, a Federal agency
which insures each account up
to $4,000. This federally in
sured segment, 83 institutions,
had most of the States saw
ings-$1.2 billion Of the SIS
billion total, leaving about $500
million in uninsured savings in
the remaining 386 firms.
Faced with this wholesale
disorder, the State began clos
ing some of the associations.
The deadwood in the industry
the 2S7 associations who were
not actively engaged In busi-
ness-had their charters re-
voked. Other firms were placed
under conservatorship or re-
ceiv e rship. Conservatorship
was ordered for a firm when it
appeared that it could be SAL
vaged by being reorganized.
Under receiverslip, other firms
were liquidated - their assets
sold so interested parties such
as creditors and depositors
could be paid off.
Varied Climaxes
This was the picture in June,
1862: OF 702 savings and loan
charters in existence when the
law went into effect in 1861.
289 had been forfeited because
they were not used to operate
genuine institutions. An ad-
ditional 20 changed their char
ters to those Of regular busi-
ness corporations; two were
dissolved and two merged.
Six firms, four in Montgom-
cry County and two in Prince
Georges, were placed in State
receivership. They had some
81 900 accounts with $16.5 mil
lion in savings. Eight firms
with an estimated 12,100 share
holders and STA million IN
savings had a conservator
placed over them or they had
nearly all their financial oper-
ations halted. At least three
other institutions were reported
to be quitting the business.
Some operators of the inSti-
tutions have been convicted in
Federal Court. Two officials
have been sentenced to six
months for mail fraud; a third
received one year and a fourth
received three years. Other Of
ficials are under indictment for
mail fraud.
Maryland voters will settle
the issue Of regulating their
savings and loan institutions.
If the electorate upholdS the
Case bill, passed by the Legis-
lature in March, 1861, the law
will be administered under a
special State board and depart
ment to supervise the institu-
tions. There will be a staff of
investigators to audit the books
and controls on the type Of in
vestments allowed.
If the States voters defeat the
Case bill and no other legisla-
ton is passed, then the States
savings and loan firms again
will be free of regulation be-
cause the emergency law will
die automatically.