ANNAPOLIS -- Heed the storm clouds in Rhode Island and use the hindsight from Maryland's own 1985 thrift crisis, a legislative agency warned yesterday. Abolish the private insurer of state-chartered credit unions was the agency's message to lawmakers.
The insurer, the Credit Union Insurance Corp., is strong, acknowledged Karen Morgan of the Department of Fiscal Services, in fact stronger than its federal counterpart, the National Credit Union Administration fund.
But the Maryland Savings-Share Insurance Corp. was strong, too, before large portions of the Maryland savings and loan industry went belly up in 1985, she pointed out to members of the House Economic Matters Committee, which reviewed yesterday the state of financial regulation in Maryland. The 1985 fiasco ultimately cost the state about $200 million, even though it had no legal responsibility for the thrifts.
"What's happening in Rhode Island is raising questions in people's minds about what's happening with credit unions here," Ms. Morgan said.
Along with Fiscal Services' call for the abolition of the insurer, and therefore the attainment of federal insurance for the 13 credit unions it insures, the department recommended that three separate agencies be consolidated: the Office of the Bank Commissioner, the Office of Consumer Credit and the Financial Audit Services Team, which acts as a kind of dispatcher for auditors for the other financial agencies.
A representative of the Department of Licensing and Regulation, which houses the financial regulators, said that the department's secretary William A. Fogle Jr., has undertaken just such a consolidation. Legislative liaison Judy Donaldson said she had no further details about the consolidation but that Mr. Fogle will be able to answer questions about it when he appears before the committee tomorrow.
"Obviously, when we get to that on Thursday we're going to be deeply concerned about cost," said committee Chairman Casper R. Taylor Jr., D-Allegany. Mr. Fogle could not be reached for comment yesterday.
Mr. Taylor was equally wary about what sort of message the Fiscal Services recommendation might send to the public about credit unions. He asked Bank Commissioner Margie H. Muller whether Maryland's credit unions could be compared to those in Rhode Island, where Gov. Bruce Sundlun temporarily closed 45 financial institutions this month.
"Credit unions in Rhode Island were making commercial loans; they were acting just like banks," Ms. Muller replied.
Ms. Muller said that recently enacted regulations in Maryland pro
hibit state-chartered credit unions from doing practically anything but taking deposits and making loans to individual members.
And James R. Brown III, a lobbyist for the Maryland Credit Union League, which includes about 10 of the state-chartered institutions, said Rhode Island's problems have not reached as far south as Maryland.
"I can assure you, in light of the Rhode Island situation . . . we have had no withdrawal experiences whatsoever," he said.