Former RI Gov. Sundlun, Financed Bailout Of Privately Insured CUs, Dies
PROVIDENCE, R. I. – Bruce Sundlun, a former Democratic governor who seized Rhode Island’s privately insured credit unions on New Year’s Day 1991 an hour after being sworn in, then financed the government-backed bailout of the state’s credit union system, died last week at 91.
On Jan. 1, 1991, less than an hour after being sworn in, Gov. Sundlun called the state’s first bank holiday since the Great Depression , closing 45 of the state’s banks and credit unions because their private insurer, the Rhode Island Share and Deposit Indemnity Corporation, had collapsed. The RISDIC collapse, which touched off a run on deposits and the collapse a week later of the Bank of New England in neighboring Massachusetts, affected more than 300,000 member accounts with $1.7 billion, which were frozen for months under the new governor’s order.
The RISDIC crisis caused the governor to organize what became a $1.5 billion taxpayer-funded bailout of the state’s privately insured credit unions and prompted more than two dozen states to ban private deposit insurance for credit unions, causing more than a dozen private insurance funds to close down across the country over the ensuing years. The RISDIC bailout was organized by the R.I. Depositors Economic Protection Corp., or DEPCO.
In order to pay off the DEPCO bonds the state increased its sales tax from 6% to 7%, dedicating the increased tax revenue to debt service on the RISDIC bonds. Gov. Sundlun said even though the state was not legally bound to pay off depositors in the privately insured institutions it was morally bound to because the name of the insurance company and the advertising of credit unions created an appearance of state backing.
Today, only a single private deposit insurer for primary credit union accounts survives, ASI Inc., of Ohio.
A millionaire who made his fortune in telecommunications, Sundlun cut a larger-than-life figure that seemed inversely proportional to the size of his tiny state. He was a multiple-decorated war hero. He had multiple homes. He had multiple marriages and multiple divorces and exploits were widely chronicled by the local and national news media.