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CHAPTER 5 Regulating Savings and Loan Associations Sometimes a simple, almost innocuous act can have ramifications throughout a lifetime. G. Kessler “Kess” Livezey owned the Livezey Lumber Company in Aberdeen. He was a local business leader and friend of our family, and, after my election to the General Assembly in 1954, he was one of my constituents. Kess Livezey and I didn’t always see eye to eye politically. In my first year in the House of Delegates, for example, he wrote me a letter urging me to support antiunion right-to-work legislation, which I had no intention of doing. Livezey’s son went to McDonogh. When I heard the young man had won some sort of sporting event, I dashed off a quick note of congratulation . His father wrote me back, asking if I would be willing to meet with him and another man, Frank Simik, to discuss a possible business opportunity. We met at Simik’s office in Belcamp, where the Bata Shoe Company complex was located. Livezey told me he had heard that it was possible to organize a federal savings and loan (S&L) association in which deposits would be insured by the federal government. He asked me if I would be interested in helping them organize a new federal S&L in our county. In addition to his lumber company, Livezey owned a lot of land and knew that ready access to low-cost home mortgages would be good for his business. I was just starting out as a lawyer, so I jumped at the chance, even though I knew practically nothing about S&Ls, federal or otherwise. That early 1954 meeting, sparked by a simple congratulatory letter to a McDonogh cadet, led me onto a path none of us could have foreseen . My involvement with—and growing knowledge of—savings and 62 CHAPTER 5 loan associations would lead me into a sharp confrontation with the governor of Maryland and legislative leaders over the failure to regulate state-chartered S&Ls. In time, my knowledge of S&Ls would help me successfully prosecute two members of Congress and one of the highestranking members of the General Assembly, all of whom were engaged in S&L fraud. My work with S&Ls would lead to my lifelong friendship with Raymond Mason, who had founded a federal S&L in Jacksonville, Florida; that relationship would later complicate my bid for reelection to the US Senate. But in 1954, what I needed to do was to learn about the savings and loan industry. State and Federal S&Ls When savings and loan associations were first created in Maryland, they were simply small, local mutual associations, often centered in a community or ethnic enclave; the Polish-American Savings and Loan Association was a typical example. Local residents would pool their savings and then be able to borrow money to build homes. Residents themselves would manage these “thrifts.” Prior to World War II, they were generally unregulated, but at that time there really was no need for regulation. They were usually solid as a rock. Federal S&Ls were substantially different.They were created in 1934 in response to the massive bank failures during the Great Depression. Because deposits were insured by the Federal Savings and Loan Insurance Corporation, federal S&Ls were closely regulated and regularly audited by bank examiners from the Federal Home Loan Bank. Borrowers were required to have a substantial down payment as a condition for each mortgage. In a word, they were safe. After my meeting with Livezey, I drove to Washington to learn everything I could about federal S&Ls. I met with some of the top people on the Federal Home Loan Bank board, who were very helpful in telling me what we had to do to organize a federal S&L in Maryland. I began by recruiting a number of our leading citizens to be on the board of directors of our S&L. On March 29, 1956, the First Harford Federal Savings and Loan Association opened in Aberdeen, and it was immediately successful. Even today, I can drive around Aberdeen and 63 REGULATING SAVINGS AND LOAN ASSOCIATIONS see the homes that our S&L financed. During the years I was involved, we never had a home foreclosure.1 It was so successful, in fact, that the following year I “crossed the Susquehanna” into neighboring Cecil County and organized the Cecil Federal Savings and Loan Association, where I also became secretary and attorney. Soon my knowledge in the savings and loan field began to spread, and I was hired by a Baltimore attorney to help organize a federal savings and loan association there. Around the same...


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