Saturday, October 11, 2008

The Maryland Savings and Loan Crisis of the 1980's

There has been much comparison of the Maryland Saving and Loan crisis from the 1980’s to the current Stock market problem and bailout. I will agree both were created by individual greed and government agencies not doing what they should have been doing but that is about where it ends. The Maryland Savings and Loan crisis was created by the Ohio Saving and loan crisis and in turn the first domino to fall in Maryland was the First Progressive, and Old Court Savings and Loan. Altho two separate S&Ls they both had the same players running them so I consider them as one. In the end the depositors and taxpayers of Maryland lost $185 million.

Maryland Savings and Loans date back to 1837. Until the stock market crash in 1929 there was little regulation of them. In the 1950’s the Building, Savings and Loans were mainly neighborhood associations. You may recall them as being little places that only opened one day a week, the larger ones, although small, were open five days a week. In the 1960’s Maryland had it first Savings and Loan crisis; 46,000 depositors in 28 Maryland Savings and Loans lost money with only 30% to 40% of their deposit being returned to the depositors. At that time the only requirement to form a Savings and Loan was to have three people with thirty dollars between them.

In 1962 the Maryland Savings-Share Insurance Corporation (MSSIC )was formed to provide insurance on Savings and Loans deposits at $20,000 per depositor. Savings and Loans were required to have at least $50,000 as capital instead of $30. Maryland S&Ls could go with FDIC insurance or MSSIC insurance for their depositors.

With the Jimmy Carter Era came increasing interest rates, S&Ls had regulations that controlled their interest rate ceilings and they had difficulty paying competitive interest rates on deposits. As the market rates increased depositors would withdraw their money and take their money to a higher paying source. In addition, S&L had restrictions on them by not being allowed to enter business other than granting home mortgage loans. In 1981 the interest rate reached 20.5%. The older S&Ls however had most of their loans at fixed rate mortgages of 6%.

Enter the Ronnie Reagan Era of deregulation and less government. The S&Ls were allowed to venture in to commercial real estate development loans. More lawyers starting controlling S&Ls, and with the lawyers came Greed. The lawyers running the S&Ls were bad enough but the depositors themselves were just as bad. The S&Ls advertised the highest interest rate (11.5%) around for deposits and they were big on the jumbos, $100,000 certificate of deposits (CD) and the money came poring in. The rule in investing is the higher interest rates means higher risk but when the S&L fall came, no depositor wanted to admit it was their fault for taking a chance. Finger pointing went to government regulators and greedy S&L owners. The owners were borrowing money from their S&Ls and buying Real Estate and lining their pockets. S&Ls begin replacing fixed rate mortgages with adjustable-rate mortgages (ARM).

Enter Jeffrey Levitt, Allen Pearlstein and Jerome Cardin. They first gained control of First Progressive Savings and Loan association. First Progressive Savings and Loan Association was a mutual association chartered in 1914 and located in Baltimore. From 1978 forward, MSSIC was concerned over mismanagement at First Progressive and flagrant violations of Maryland laws and regulations. Since the Board of MSSIC was controlled by the S&L’s and MSSIC lawyers, Venable, Baetjer and Howard, advising them also did business with Levitt, Pearlstein, Cardin, First Progressive and Old Court, the end result nothing was done to stop First Progressive. In 1982 Levitt and Pearlstein purchase the stock of Old Court Saving and Loan. Old Court S&L was located on Old Court Road in Randallstown, Maryland and eventually had branches all over Maryland.

In March of 1985 Ohio had a run on their Savings and Loans that started with Cincinnati’s Home State Savings and Loan and ended with Governor Richard F. Celeste declaring a bank holiday and the temporary closing down of 69 privately insured S&Ls. This created a run on all Savings and Loans everywhere that were State or privately insured and the Maryland Saving and Loan crisis became a reality. The crisis was created by three major causes 1) a total absence of regulation, 2) individuals who took advantage of the absence of regulation to expropriate depositor’s money, 3) a system that allowed the S&L industry to make and enforce its own rules.

Altho First Progressive and Old Court were the first S&Ls to go, there were many others such as; Merritt Commercial Savings and Loan, Community Savings and Loan, First Maryland Savings and Loan, Friendship Savings and Loan, Ridgeway Saving and Loan, and Sharon Security.

Maryland’s panic started with the press revealing Jeffrey Levitt had stepped down from Old Court due to sloppy management and overly rapid growth. Levitt had pushed the S&L from $140 million to $873 million in three years. Well the run on the Savings and Loans was a classic bank run. People lined up outside the S&Ls with folding chairs to sit in and coolers waiting for their turn to withdrawal their deposits. On May 13th Old Court went into conservatorship. On May 14th Maryland Governor Hughes declares a crisis and limit withdrawals in 102 MSSIC institutions to $1,000 every thirty days. This posed problems not only for individuals but businesses trying to meet payroll. On November 8th 1985, Maryland Deposit Insurance Fund (MDIF) was appointed receiver of Old Court S&L and they stated owners of certificate of deposits would receive no interest for the period May to November and after that only 5 ½% rather than the higher rates on the certificates. Depositors would not be entirely paid off until the 1990’s. The S&Ls in trouble were sold off to banks like Chase Manhatten and Citicorp bank.

Jeffrey Levitt and his wife, Karol, were posters children for the Maryland Savings and Loans crisis. They had 17 cars, a rolls-royce golf cart with stereo and TV, they were gluttony personified. They were fat people and once the downfall came the press made fun of them. The dislike Jeffrey Levitt and his wife Karol were held in is displayed in this article from the Washington Post. Both were obese and Karol always had on a leather cost, numerous jokes were made about them such as; What do you call their waterbed? Bay of Pigs. How did they get her into her jail cell? Greased the bars and threw in a Twinkie. What do they sing when she walks down the street? There she is, North America. They tied a chain to his wife Karol and dragged her through the Harbor Tunnel in that leather coat to scrub the walls. It was a community service thing.

In 1986 Jeffrey Levitt was brought to court on charges of stealing and misappropriating a total of fourteen million, six hundred ninety-nine thousand, nine hundred forty-seven dollars and fifty-eight cents. He received thirty years. Karol Levitt got 15 weekends in a Baltimore jail. Jerome Cardin was sentenced to 15 years for stealing $385,000. Allen Pearlstein was found guilty of stealing $640, 000.

In August of 1989 Karol Levitt, at 45 years of age, died of a heart attack in Boca Raton, Florida. Her body was buried in Maryland and her husband Jeffrey, who was still serving his prison term, was allowed to leave prison for 14 hours to attend the funeral. In November of 1993 Jeffrey A. Levitt was released on parole. Later in the 1990’s he was running a cigar shop in Florida. I believe he is still alive.

The findings of the Special Counsel on the Maryland Saving and Loan Crisis (The Preston Report) in 1986 were; the crisis occurred because of mismanagement of the Division of Savings and Loan associations and Maryland Saving Share Insurance Corporation (MSSIC). Second; the gross mismanagement of certain Savings and Loans associations. Third; the Saving and Loan industry controlled the Board of Directors of MSSIC and the Board of the Savings and Loan commissioners who were responsible for regulating the industry instead of acting to safeguard depositors’ funds, they primarily acted to promote the industry

The difference in the Bailout today from the S&L Crisis of yesterday is no one is going to jail today and it costed the taxpayers a lot less back in 1985.

Friday, October 10, 2008

The Biff and Barb Campaign

The only election campaign in our area that seems to be doing anything is the Biff and Barb campaign. Both are running for the State Representative of the 40th District. I notice Biff Lee now has a website to compete with Barb's, who has had one since the beginning of the race. I looked at Biff's website and it is a surprisingly well done website. Not all the links work but I am sure that will be fixed shortly. You have to be impressed with him in the fact he gives his phone number for you to call him, he gives his street address and he says stop by for coffee and a talk at the VFW in Delmar or Britts in Laurel.

Over at Barb's Website it says she will be at Apple Scrapple tomorrow and on the 14th is "Meet Your Candidates" at 6:30. Where Representative Biff Lee and Barb Hudson will answer questions. The evening is being sponsored by the Laurel Chamber of Commerce. The event will be held at second floor at Laurel Town Hall, 201 Mechanic Street, Laurel, DE 19956.

John Glover

John Glover, actor, has returned to Salisbury. He has been coming back for the Alzheimer Association walk for a number of years now. I always enjoy watching him on TV and I particularly liked the part he played as the Devil in the 1998 series Brimstone. I even sent an email to the network, when they dropped it, complaining about them dropping the show.

Now John Glover was a year behind me at Wi Hi. I really don't seem to remember him but usually you remember the ones that are older and in the next grade instead of the ones younger and behind you. Based on my yearbook (1961) I see he was a player in the Junior Class Play "Liliom", but did not have a starring role or any role other than crowd person. No doubt Miss McMurrian (English teacher)was the director who never had much luck recognising talent. So what did John Glover look like in 1961? see below.

Why We Go To Auctions

From the Salisbury Advertiser June 1909

Through the purchase of a Small safe at a public sale over thirty years ago, Nathaniel Conway, former coroner of Sussex County, who lives at Seaford, has come into a fortune.

At the time of the purchase Mr. Conway stored the safe in his stable. A few years ago he had the safe removed to his office, but being unable to open it, he moved it aside. This week he determined to find its contents and succeeded in breaking the lock.

When the door swung open gold coins of many denominations fell to the floor. The noise attracted a large crowd and from the outside Conway could be seen gathering the gold from the floor, putting it into bags.

Mr, Conway refused to say how much gold the safe contained but says he can live the rest of his days in luxury.

Of note the Mason Dixon Auction in Delmar is tonight but I didn't see any safes for auction.

Wednesday, October 08, 2008

Meet Your Candidates Night

Biff Lee and Barb Hudson will be at the Meet Your Candidates Night sponsored by the Laurel Chamber of Commerce on Tuesday October 14 at 6:30 in the Mayor and Council Chamber, second floor at Laurel Town Hall. Both will be asked questions by the Chamber of Commerce. I do not know if public questions will be accepted to ask the candidates.

Tuesday, October 07, 2008

You Know You're From The Gulf Coast If

I lifted this from Baboon Pirates blog.

You Know You're From The Gulf Coast If:

1. You have FEMA's number on your speed dialer

2. You have more than 300 'C' and 'D' batteries in your kitchen drawer

3. Your pantry contains more than 20 cans of Spaghetti O's

4. You are thinking of repainting your house to match the plywood covering your windows

5. When describing your gutted house to a prospective buyer, you say it has three bedrooms, two baths and an open air feel to it

6. Your SSN isn't a secret, it's written in Sharpie on your arms

7. You are on a first-name basis with the cashier at Home Depot/Lowes and Sutherlands

8. You are delighted to pay $4.00 for a gallon for regular unleaded

9. The road leading to your house has been declared a No-Wake Zone

10. You decide that your patio furniture looks better on the bottom of the pool.

11. You own more than three large coolers.

12. You can wish that other people get hit by a hurricane and not feel the least bit guilty about it. (well maybe a tad)

13. You rationalize helping a friend board up by thinking it'll only take a gallon of gas to get there and back.

14. You have 2-liter coke bottles and milk jugs filled with water in your freezer.

15. Three months ago you couldn't hang a shower curtain; today you can assemble a portable generator by candlelight.

16. You catch a 13-pound red fish - in your house.

17. You can recite from memory whole portions of your homeowner's insurance policy.

18. You consider a vacation to stunning Tupelo, Mississippi.

19. At cocktail parties, women are attracted to the guy with the biggest chainsaw.

20. You have had tuna fish more than 5 days in a row.

21. There is a roll of tar roofing paper in your garage.

22. You can rattle off the names of three or more meteorologists who work at the Weather Channel.

23. Someone comes to your door to tell you they found your roof.

24. Ice is a valid topic of conversation.

25. Your drive-thru meal consists of MRE's and bottled water.

26. Relocating to South Dakota does not seem like such a crazy idea.

27. You spend more time on your roof then in your living room.

28. You've been laughed at over the phone by a roofer, fence builder or a tree worker, and probably one of each.

29. A battery powered TV is considered a home entertainment center.

30. You don't worry about relatives wanting to visit during the summer.

31. Your child's first words are "hunker down."

32. Having a tree in your living room does not necessarily mean it's Christmas.

33. Toilet Paper is elevated to coin of the realm at the shelters.

34. You know the difference between the "Clean Side" of a storm and the "Dirty Side."

35. Your kids start school in August and finish in July.

36. You go to work early and stay late just to enjoy the air conditioning.

Frozen Food Locker Plants

Another disappearing business is the Frozen Food Locker Plant. When I was growing up there were a couple in Salisbury (Charley Williams and Wicomico Frigid Food) and one in Laurel (Koster’s) and in Pocomoke (Garland Bull’s). When locker plants were popular in the 1940’s and 1950’s home refrigerators had a very small freezer section, not at all like today’s refrigerator. I am talking about a size that would only hold a couple ice cube trays and a container of ice cream. At that time Delmarva was still orientated to a rural economy which meant you canned or froze garden produce, possibly grew your own chickens for the dinner table, would hunt/fish and bring home deer, ducks and fish, or would buy a whole hog or large section of a cow. You needed space to freeze all this stuff and home refrigerators were not the answer. Enter the frozen food locker. a large refrigerated building which had a freezer room that was kept at between -15 to -25 degrees Fahrenheit, there the food was ‘quick frozen’. The locker plant would rent out a drawer or locker to you for a little over a dollar a month. As a rule of thumb you could figure one cubic foot of freezer space would hold 35 pounds of cut and wrapped meat. The locker plant frequently had a butcher shop connected with it that would do custom butchering of your deer or cow and wrap it for you. They also sold freezer supplies such as freezer boxes and bags for you to put your garden produce in.

As time moved on, home refrigerators begin having larger freezer sections, grocery stores became more plentiful and people got away from home gardening and laying in a supply of meat when they found a bargain in meat. No, I won’t go into a lecture on the $700 billion bailout and spending/saving habits of Americans today, as tempting as it is. People became more orientated to the “I want it now” philosophy and found having to remember to go by the Locker Plant before it closed to get their food out was too much of a nuisance. With the increased Health inspections, higher electric costs, and the change in the savings habits of Americans the frozen food locker plants begin disappearing. At the moment I can think of none that exist in the area.

My last connection with Locker Plants was back in the 1980’s when I knew Al Griner and Al owned the Koster’s locker Plant in Laurel. The plant was of course sold and torn down about the end of the 1990’s. Al was a great guy and was always enjoyable to talk to. The locker plants were at that time, still a good place to store ducks, venison and fish. Some times, on those rare occasions, when you would do well at fishing you just need space for all of them. Did I mention that the Department of Natural Resources also inspected Locker plants for illegal size, type and quantity of fish and fowl?

Locker plants are once again being looked at. This time as community food lockers and a place to store your food when a natural disaster (hurricanes etc) strike and the area is with out power for a week or so. You can salvage what is in your home freezer and take the food to the food locker until things return to normal.

Monday, October 06, 2008

Unfounded Rumors

There is always some rumor floating around that usually doesn't become fact, the current one is Bargin's Bills in Laurel has been sold to a Walmart Subsidiary. As we know it was put on the market a while ago at $8.9 million. Fact or not there you are.

Blogger Questions for Biff and Barb

Questions presented to the candidates for Delaware's 40th Representative District, Barb Hudson and Biff Lee, for the 2008 election. We gave both Barb and Biff a number of questions developed by Elbert, Uncle Paul and my self. We decided to show the answers to the questions received from the two candidates by splitting them among our blogs. Part 1 is on my blog, part 2 is on Uncle Paul's blog and part 3 is on Elbert's blog.

1. What is your stance on Gun control?

Hudson: I believe the 2nd Amendment guarantees individuals the right to bear arms. Gun control should only occur when it is necessary to protect law abiding citizens; for example, not allowing felons or mentally unstable people to purchase handguns.

Lee: I am a supporter of gun control but also the rights of responsible individuals to own and bear arms. As a former Delaware State Police Office, the monitoring of who is buying guns is important though I realize guns are accessible through illegal markets. Having some safeguards in place such as background checks and waiting periods is necessary for the safety of the public. I received an A plus rating by the NRA for my stand on gun control.

2. Delaware Tech received an increase in students when the Student Excellence Equals Degree (SEED) scholarship program was put in effect. In 2007/2008 Del Tech wanted the State to provide funds so they could do capital improvements as opposed to raising tuition. Sen. Robert Venables, and Rep. Vincent Lofink, tried to put through a bill to provide 0.28 addition to the 3% transfer tax as a way to provide funding for this. It was shot down. What is your opinion on this?

Hudson: I believe the SEED program is beneficial to students as well as society in general. If we have an educated and prepared workforce, we will attract new businesses to Delaware. That will help everyone in the long run. Looking at all avenues for the money should be explored before any additional tax is passed.

Lee: Giving eligible students of a lower income the opportunity to attend Delaware Tech is a worthy initiative. Education of our young people is important not only in terms of the future of our state but to the future of our nation. This was one of the questions I asked in my survey of issues of importance to the district and overwhelmingly the response was not in favor of providing capital improvement monies to Del Tech. I also received a great many calls from residents not in favor and voted the will of the people.

3. OOGA - or Open Our General Assembly would provide for more open state government by removing the exemption of the General Assembly and its deliberations from the Freedom of Information Act. It was held back by state Senate Pro Tem Thurman Adams. What is your stance on Open Government?

Hudson: I would like to see real changes that would create open government including changing regulations that would open the Joint Finance Committee meetings and Bond Bills Committee meetings without substantively impairing a free deliberation of ideas.

Lee: The House of Representative introduced five bills regarding Professional Conduct of the Legislature last session. I was pleased to be a co-sponsor of these initiatives and will continue to support the issue of open government during the next legislative session.

4. Since Delaware is supposed to have a balanced budget what agencies do you propose to take money away from to see that the areas you want to increase attention to receive money?

Hudson: I have no specific proposals at this time but I do know that State spending must be reduced.

Lee: Balancing Delaware's Budget this past legislative session was no easy task based in part on the fact that money had to be trimmed from the current operating budget to offset costs before the next fiscal year could be addressed. The Joint Finance Committee from both sides of the aisle had to make tough decisions in order to accomplish their mission. The one positive out of this challenge was the review of many programs that had been in existence but had ceased to be productive. Cuts were made to make the least negative impact on the State of Delaware and to make sure the basic services required of the state were not affected. In a large part, this was accomplished, but with the continued downturn in our economy the need for government supplements will continue. It is important to keep in mind that many of our programs are in concert with funding from the federal government and as such these obligations must be met or funding is lost.

Education, public safety, homeland security, housing etc. are all important issues that will become increasingly important as the years go by. But in order to stimulate the State of Delaware to regain its financial edge money must be utilized to enhance, attract and retain business in our area. We must also have the necessary resources to provide the type of skills needed to find the kind of jobs that will enable them to make an honest wage in which to raise a family. Having a skilled workforce is also a major enticement to companies wanting to locate in our area.

For the next set of questions go to Uncle Paul's blog.

Hayman Sweet Potatoes

I purchased my first Hayman Sweet Potatoes yesterday at the Salisbury Flea market. It is so early in the season I am sure they had not been 'cured' yet, so it will be a couple weeks before I bake them. There is an interesting article on growing Haymans on the GHOTES site. It has been there a number of years but for those of you who may not have seen it it is here.

Elisabeth J. Shue

Today in 1963 Elisabeth Judson Shue was born in Wilmington, Delaware. Elisabeth Shue is an actress best known for her movies in the 1980's ( Karate Kid, Adventures in Baby Sitting, Cocktail etc). Most recently she was in Hamlet 2.

Sunday, October 05, 2008

The Tunnel

In 1954 several new things started the Salisbury school year, first Wicomico Sr High School opened. The new 'campus' design with walkways between building, cafeteria and gym looked nice for the 1950's and it was, just when you walked between buildings and it was raining or snowing or just plain cold it wasn't the best thought out design. They also built a tunnel in the Main Street underpass in 1954.

I arrive at the Wicomico Library before it opened today and to kill time took a walk around downtown Salisbury. It is a boring obsolete place. You would think it would be a model of failure for all the other towns that want to renew their downtown. Out on RT13 and main, I do remember the tunnel was a high point when I went to Junior High and walked up town after school. Back then I was pretty much a simple country kid, unlike the sophisticated Delmartonian I am today. The tunnel I thought was cool. It echoed when you walked thru it and it had those cool tiles on side. Nothing else around that approached it for being an Eastern Shore Novelty. It is a toss up for am eleven year old rather going thru the tunnel was best or taking the dirt path over the top of the railroad embankment. Today the tunnel seems to be a resting area for various people. Have you looked at that steel railroad bridge going over Main Street? It looks bad. I understand it was built in 1925. There was a lake there and the rail line embankment and bridge crossed over the lake. When the dam broke and the lake drained it allowed Salisbury to expand East so they extended Main street under what we call the underpass.

The other place I remember with less fondness were the public restrooms they had on the Main street side of the courthouse. The good thing was at least Salisbury had public restrooms, the down side I will leave to your imagination.

1954 Ad - Edward Brittingham - Wicomico County

New Technology for An Old Idea

Over on Strange Maps I saw this post on a wrist road map. As Strange maps says "the ‘Routefinder’, showed 1920s drivers in the UK the roads they were travelling down, gave them the mileage covered and told them to stop when they came at journey’s end." I think the modern day GPS systems stole their patent ideal.