Northeast Out of Running for 4 Closed Institutions in R.I.
PROVIDENCE, R.I. - A plan under which Northeast Savings of Connecticut would acquire and reopen four closed Rhode Island financial institutions has collapsed, state officials said.
"I am extremely disappointed that the proposed acquisition by Northeast of the five credit unions, which was arranged by the federal Office of Thrift Supervision, cannot be completed," Gov. Bruce Sundlun said in a statement Thursday night.
The plan involved three teachers' credit unions - East Providence, Columbian, and Providence - and a bank, Greater Providence Trust. Gov. Sundlun's statement also said a fifth financial institution, the Blackstone Valley Loan & Investment Bank, was involved, but Northeast said it had never considered Blackstone.
|Deal Breaker' Demand Blamed
Officials said the deal fell through because of terms Northeast wanted in order to re-open the facilities.
"The deal-breaker was Northeast's insistence that the state, through the Investment Commission, provide funds not only to compensate for liabilities associated with the closed credit unions, but also to allow Northeast to use $25 million in Rhode Island funds to refinance a $60 million debt to the Federal Savings and Loan Insurance Corp.," Gov. Sundlun said.
The governor said that Northeast "should not use Rhode Island to pay its debt to FSLIC."
Governor's Taxpayer Defense
Gov. Sundlun said he wants to do everything he can to get money back to the depositors, but he will not "allow any financial institution to take advantage of the situation by insisting on terms which will create further liability for Rhode Island taxpayers."
If the deal had gone through, the depositors would have had immediate access to all their funds. More than 104,000 depositors have received little of their $501.3 million in deposits since Jan. 1, when the banking crisis burst into the open.
Gov. Sundlun and Northeast president George Rutland traded accusations of bad faith.
Mr. Rutland said Gov. Sundlun and other state officials were distorting his bank's demands and claimed the cause of the breakdown was a "cash squeeze" at the state Investment Commission because of its recent takeover of Old Stone Bank subsidiaries in North Carolina and California.
Mr. Rutland said federal regulators and bank officials had let state negotiators know from the start of talks that the $25 million loan would be necessary before the bank could issue new preferred stock to the Investment Commission.
Mr. Rutland said an indication that "there might be some problems" arose only a week ago, after numerous meetings during which no objections were raised to the bank's proposal.
The facilities could face liquidation if no other suitor emerges. Superior Court Judge Robert D. Krause has set a Nov. 4 deadline. They could also become branches of the state's newly acquired savings and loan in North Carolina.