WASHINGTON - The Rhode Island Depositors Economic Protection Corp. said it has sold its entire stake in Northeast Federal Corp., the Connecticut-based thrift that took over operations of institutions affected by the collapse of a private deposit insurance fund last year.
It was reported on June 23 that Rhode Island Depositors Economic Protection was negotiating to sell its Northeast Federal shares to the Rhode Island State Investment Commission.
In a filing with the Securities and Exchange Commissions, the depositor protection agency said that on June 24 it had sold to the investment commission warrants for 800,000 common shares and 351,700 shares of preferred stock for $20 million.
Northeast Federal's common stock was trading Monday's afternoon at $5.375 a share down 12.5 cents from Friday's close.
Crisis Near Resolution
Meanwhile, over the past weekend, Rhode Island's banking crisis neared an end after 18 months as the state made payouts to a final group of 40,000 depositors.
The Wall Street Journal reported that the depositors gained access to 90% of their savings in accounts that had been frozen since Jan. 1, 1991.
Some $1.7 billion in savings and checking accounts were frozen at the outset of the crisis, sending 350,000 depositors - one-third of the state's population - into a panic and leading to an investigation of lax management and influence peddling at the private insurance fund.
Insolvent Credit Unions
Many smaller institutions qualified for federal deposit insurance and reopened soon after the Rhode Island Share and Deposit Indemnity Corp. went under.
But a handful of credit unions with total deposits exceeding $1 billion, were insolvent due to huge losses on questionable loans.
The state created the Depositors Economic Protection Corp., or Depco, to sell the troubled institutions that it could, liquidate those it couldn't, and manage or dispose of any remaining assets to pay off depositors.
With the value of the assets far below the amount owed depositors, Depco has sold $450 million of bonds.
The final chapter in the crisis began over the weekend. Long-suffering depositors got access to accounts with $526 million at the remaining five credit unions that hadn't been reopened, sold, or closed.