On December 31, 1990, the Providence Journal ran an editorial headlined “Goodbye, Governor,” reflecting on the mostly positive marks received by outgoing Gov. Edward DiPrete.
A day later, and only an hour after he was inaugurated into office, incoming Gov. Bruce Sundlun announced the closure of 45 banks and credit unions across Rhode Island due to the collapse of their private insurer, the Rhode Island Share and Deposit Indemnity Corporation (RISDIC).
The Hassenfeld Institute for Public Leadership, in partnership with Common Cause Rhode Island, hosted a Nov. 13 premier screening of the documentary film “Crisis of Confidence: The Rhode Island Credit Union Collapse.” The film chronicles the chaos that ensued after the closure, embroiling Rhode Island in one of the most notorious financial crises the nation had ever witnessed. It separated hundreds of thousands of businesses and individuals from their money for up to one and a half years, and triggered a cascade of protests, defaults, business failures, and even suicides. The film was followed by a panel discussion further examining the failures that led to the crisis, and the lessons that still resonate today.
“We felt this topic would appeal not only to public leaders, but to the public in general, as so many everyday citizens were affected,” says Cynthia Elder, Assistant Director at Bryant’s Hassenfeld Institute. “For the leaders of today and tomorrow, this is a cautionary tale about having the vision and courage to respond to looming problems before they become full-blown crises.”
The Hassenfeld Institute’s Melissa Prosky, Ph.D., presented an in-depth case study on the crisis, which inspired the event and informed the film. “Crisis of Confidence: Responding to the Rhode Island Credit Union Debacle” details many of the warning signs leading up to the crisis, and the often-painful steps taken by the new administration that slowly repaired the damage.
Both the case study and the film are now available not only to educators at Bryant, but also to colleges and universities throughout Rhode Island. The Hassenfeld Institute will also offer workshops to state and municipal leaders based on the film and case study.
Failures of leadership and oversight
The film and the ensuing panel discussion reflected on the many failures of leadership – from bank and credit union officials, to regulators, elected officials, and others – precipitating the crisis that brought so much suffering to Rhode Island’s residents and businesses.
Panelists included Ross Cheit, Ph.D., a Professor of Political Science and International Affairs at Brown University, who also chairs the Rhode Island State Ethics Commission and was a primary author of “Carved in Sand: Gregorian Commission Report on the Collapse of RISDC”; John Kostrzewa, a former Providence Journal writer, editor, and columnist, who with a team of reporters won the Sevellon Brown Public Service Award for their coverage of the crisis, and is also a Bryant adjunct faculty member; and John Marion, Executive Director of Common Cause Rhode Island. The panel was moderated by Elizabeth Harrison, News Director of The Public’s Radio (formerly RI Public Radio).
“[The credit union crisis] rocked the foundations of many of the state’s institutions. People felt betrayed by those institutions, and particularly by their government.”
Depositors suffered most acutely in the wake of the crisis, but all Rhode Islanders were eventually responsible for bailing out the credit unions, Kostrzewa pointed out during the discussion, adding that it was much more than just a financial crisis. “It rocked the foundations of many of the state’s institutions. People felt betrayed by those institutions, and particularly by their government,” he said.
“None of that suffering was necessary if any of those public leaders had done their jobs in any kind of honest and ethical way,” Sen. Sheldon Whitehouse (D-RI) says in the film. At the time, Whitehouse was the new Director of Policy for incoming Governor Sundlun, and was thrust quite by surprise into the controversy which would go on to dominate the state’s public consciousness for months – and indeed years – to come.
The effects of the crisis, panel members pointed out, still resonate in Rhode Island in the form of things like increased taxes, long-deferred infrastructure work, and significant reforms in the way governance and oversight are conducted.
UPDATE: The Hassenfeld Institute has added an online forum of personal reflections from this difficult chapter in Rhode Island's history. Those with stories to tell are invited to send their memories for possible inclusion in the forum.