PROVIDENCE, R.I.–A chapter in credit union history that many would rather forget has had a new light shone on it.
The early 1990s failure and resulting scandal of credit unions across Rhode Island, along with their private deposit insurer, the Rhode Island Share Deposit Indemnity Corp. (RISDIC), has been highlighted by GoLocalProv.com in an extensive report as part of a series on how “Rhode Island government has failed in the past to protect Rhode Islanders.”
In this case, the RISDIC failure—which led to the government shutting 45 credit unions and banks at one point--involved everyone from the governor, a former governor, members of the state legislature and the leaders of credit unions themselves. Among those at the center of attention was the president of the then Rhode Island CU League, who also held powerful positions in the state legislature and who had helped squash a report that had found five years earlier that the insurance fund was at risk of toppling at any time.
The failure left tens of thousands of Rhode Islanders unable to get to their savings, and enraged CU members and bank customers packed the capitol and even threatened violence over the failure, which was estimated in 1992 to have cost the state more than $470 million.
Widespread Publicity
The publicity surrounding the failure in Rhode Island was so widespread that credit unions nationally responded, while CUs in other states found themselves subjected to scrutiny, as well, even when they carried federal deposit insurance.
The failure of the private insurance scheme came after similar schemes had failed in other states, as well.
For a look at this piece of (unfortunate) credit union history, go here.
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