The Rhode Island banking crisis
took place in the early 1990s, when approximately a third of the US
state of Rhode Island
's population lost access to funds in their bank
accounts. The events were triggered by the failure of a Providence
bank, Heritage Loan & Investment, due to long-term embezzlement
by its president. News of its problems led to a bank run
in which customers tried to withdraw money from the bank which did not have enough money available. In normal circumstances, depositors would be protected by the bank's insurance
, but the state's private insurer had a long history of problems and was unable to fulfill its commitments. When the insurer collapsed, Governor Bruce Sundlun
announced the closure of 45 credit unions
and banks just hours after his inauguration.
In the first in the state since the Great Depression
, 300,000 depositors lost access to their money. Though some of the institutions reopened relatively quickly after obtaining federal insurance, many did not qualify and remained closed for an extended period of time. The state government set up an agency to manage the crisis, selling $697 million in bonds to repay people while filing about 300 lawsuits against the closed institutions and other companies that played a role in the crisis. Read more...