Last week’s rally was only the latest public outcry in the biggest fiscal crisis to hit Rhode Island since the Great Depression. Enraged depositors began protesting in early January, when the governor shut down 45 banks and credit unions after the failure of Rhode Island Share and Deposit Indemnity Corp. (RISDIC), the private insurance fund that covered the institutions. (As in similar crises in Ohio and Maryland, the Rhode Island fund crumbled after bailing out a troubled bank: Heritage Loan and Investment Co. failed in 1990 after its president vanished. Also unaccounted for is $13 million of the bank’s money.) Sundlun has since reopened 32 of the 45 institutions. But out of an original $1.7 billion worth of frozen assets, some $1.2 billion in 13 banks and credit unions remains in limbo. The state is encouraging solvent institutions to buy and reopen the insolvent ones. But last week regulators said a deal that called for Old Stone, a New England Bank, to buy some of the 13 institutions had fallen through. Another deal by Northeast Savings Bank of Hartford is in the works. The governor has also created a fund to repay depositors up to $100,000, though some “may have to wait for their money over a period of years,” he says.
That’s little consolation to the one out of three Rhode Islanders–many of them middle-class elderly–who have been affected by the scandal. Many had sold their homes and socked the proceeds away so they could live off the interest checks alone. But those cheeks stopped coming long ago. For Hedy Murphy, a 64-year-old Woonsocket resident, the consequences have been disastrous. “Before the crisis, I was traveling, I had a steak when I wanted to. I bought clothes when I wanted.” Now, she says, she can barely afford heat, electricity and day-old bread. “My life has taken a dump.”
Though officials repeatedly remind citizens that the state has no legal obligation to clean up after a bank’s private insurer, critics say Sundlun has done nothing to comfort constituents like Murphy. “He is made of precious metal,” says Jack Kayrouz, founder of Citizens for Depositors’ Rights, which claims 38,000 members. “He has no feelings of any kind for his subjects.” Sundlun says he has repeatedly offered assistance to depositors and personally calls four or five of them at home each night. “I discuss whatever they want to discuss.”
Skies may soon be brightening for some unhappy investors. If Northeast’s proposal goes through, the thrift will likely acquire four credit unions, paving the way for partial restoration of losses. The action may come too late to restore Sundlun’s image. If the crisis isn’t resolved soon, says Kayrouz, “we could have riots-and riots by people over 60 years old.” Sundlun is forging ahead with plans to seek another term. After all, Rhode Island can be forgiving: residents of Providence recently re-elected Mayor Buddy Cianci, despite his conviction on assault charges. Given the circumstances, however, few might give Sundlun the same benefit of the doubt.
