BEST BUSINESS BLUES AND BOONS As stocks flew high, everything else dove

In the end, 1991 was the year of Alfred Lerner.

Mr. Lerner, chairman of MNC Financial Inc., entered the 1990s flush from a decade in which his net worth shot up, cresting well into Forbes 400 range. But then real estate crashed, the Feds seized the Bank of New England, and banks such as MNC's Maryland National and American Security looked like prime candidates to be next.


MNC needed more than $650 million to pay short-term debts, its prized MBNA America credit card subsidiary was drawing no offers for what it was really worth, and MNC's stock was drawing hardly anybody willing to pay even $2 a share.

But then MNC sold MBNA to the public in January, raising more than $730 million for MNC and avoiding possible bankruptcy.


Mr. Lerner, who had earlier pumped $180 million in fresh capital into MNC, stepped up again to buy the biggest chunk of the MBNA offer.

In a year when business leaders had to walk a recessionary tightrope to keep the gains of the 1980s from evaporating altogether, Mr. Lerner had to do back flips. But his maneuvers were only the most dramatic.

Throughout Maryland, other business people have had to make fancy moves of their own, with mixed results. Below, some highlights of what Sun business reporters called the stories of the year on their beats.


Question: How do you call your banker these days?

Answer: Excuse me, Waiter!

Layoffs were more the rule than the exception, as at least one of Maryland's biggest employers (MNC) fought for its life and others tried to reverse years of policies that the companies now think were misguided.

The most visible layoffs came at Westinghouse Electric Corp., MNC Financial and insurance giant USF&G; Corp. Maryland National has never announced exactly how many people it laid off, though officials said in May that they wanted to cut $100 million in annual expenses.


USF&G;, beaten down by overly aggressive insurance pricing and a too-generous stock dividend, laid off more than 1,100 people in two rounds of cuts.

But the biggest cuts came at the state's biggest industrial employer, Westinghouse, whose Electronic Systems Group is based in Linthicum.

Westinghouse laid off 2,500 workers in two rounds of cuts. One followed a canceled order for military planes; the other followed big real estate lending losses by another Westinghouse unit.

Recessions we've seen before, but this one was different. While mild by most conventional yardsticks, the recession hit hard at a class of people -- white-collar professionals -- who did not bear the primary brunt of the 1982 downturn. And they were surprised when they bore the brunt of this one.

"The idea was to get an education, go white collar and get security," said Jonas Ryckis, a Baltimore accountant whose fiancee was laid off from a financial analysis job in July. "In the '90s, that's just not so. There's no safety to fall back on."

Crashes: Land and air


1991 was a bad year for crashes. USAir saw its profits crash, AT&T; and Bell companies saw their phone systems through embarrassing crashes, and the real estate market continued to see perhaps the most intractable crash of them all.

The year saw a record high number of foreclosure sales scheduled for Baltimore developments, including office buildings, hotels and town houses.

But most of the auctions didn't work: Most properties failed to sell and were "bought back" by the lending institution that had foreclosed on the original loan.

With all the auctions, it was no wonder that construction slowed dramatically.

Trammell Crow pulled back from plans to build Baltimore's tallest building at One Light Street, and also from an 800,000-square-foot office complex in Owings Mills.

Only two major office buildings -- Towson Commons in Towson and Commerce Place downtown -- are scheduled to open this year. Preleasing at both buildings has been weak.


USAir wasn't able to keep its finances flying high. The biggest user of Baltimore-Washington International Airport has projected it will lose $500 million this year, after losing $306 million by September, and announced in the fall a $400 million cost-cutting program based on wage concessions to save the airline.

"We cannot continue to lose half a billion dollars year after year," company General Counsel James T. Lloyd said.

MCI Communications hasn't lost half a billion dollars, but its high tech met its match in December, when a beaver chewed through a cable and cut off thousands of customers' long-distance service, affecting 1.5 million calls.

Chesapeake and Potomac Telephone Co. had its biggest outage in memory in June, when 5 million customers were cut off for several hours. A computer programming error was blamed.

And the AT&T; outage in September that shut down New York's airports was blamed in part on a burned-out light bulb and on a broken strap that disabled an alarm.

Despite problems on land and in the air, there was no crash "at sea," meaning the Port of Baltimore. While the Maryland Port Administration continued to run a deficit, and the recession pushed the amount of cargo shipped through the port lower during the third quarter, there was good news in November.


Maersk Line, one of the world's largest steamship lines, signed a 10-year lease on space at the port. Gov. William Donald Schaefer called it "a historic day" when Maersk signed the deal.

The market: No crash here

There was no crash on Wall Street either. While the economy was slipping and sliding, the stock market had a very good year.

Depressed during the buildup to the Persian Gulf War, the market took off as the Scuds were shot from the sky by U.S. missiles. After lagging later in the year because of the slow economy, the market closed strong after a dramatic discount rate cut by the Federal Reserve in December.

The Dow Jones Industrial Average closed the year at 3168.83, up 535.17, or 20.3 percent for the year.

That meant good things locally. First, Alex. Brown Inc. and Legg Mason Inc. of Baltimore, the state's two biggest broker-dealers, had a terrific first three quarters of the year.


Alex. Brown also got a new CEO as A. B. Krongard took over, and, for the first time, elected a board majority from outside the ranks of men who were Brown partners before the firm went public.

The strong market also meant Maryland companies found it easier to raise money by selling stock. Several young companies, such as Genetic Therapy Inc. of Gaithersburg went public. And Nova Pharmaceutical Corp. of Baltimore, which was already publicly traded, announced plans late in the year for a secondary offering.

Best soap opera

In 1990, First Maryland Bancorp wanted to take over the parent company of The Bank of Baltimore for $17 a share, or about $215 million. Baltimore Bancorp said no. Shareholders didn't like it.

In 1991, Baltimore Blast owner Ed Hale offered to take control of the bank without paying stockholders anything for their shares. Shareholders were so mad that they took him up on it.

Mr. Hale spent only $1.2 million for the proxy fight, mostly for lawyers. And, even then, the bank repaid him.


For almost five months the battle to elect 16 new directors to the company's board raged, with Emily Post nowhere to be found. Management all but cursed Mr. Hale, and some of his allies, and Mr. Hale, a voluble sort himself, could at times be seen almost physically straining to keep his zingers about management in his mouth.

Mr. Hale's lawyer, Dennis Gingold, casually dismissed one of management's many legal maneuvers as "more of the same bull."

One incumbent manager responded by noting privately that Mr. Gingold seemed to change jobs an awful lot.

In the end, Mr. Hale won a narrow victory and almost all the bank's old senior managers are now gone (Harry L. Robinson, the former chairman, got a $1.7 million golden parachute). The bank's new president and new chief executive officer, Alan Leberknight and Charles H. Whittum, are both Signet Bank/Maryland veterans. Mr. Hale is chairman.

For all the sound and fury, the bank's stock closed the year at $5.375.