RG 060. Depositors Economic Protection Corporation (DEPCO), 1936-2001

The Rhode Island Share and Deposit Indemnity Corporation (RISDIC), created in 1969 to insure deposits at state chartered credit unions, collapsed in December of 1990. Problems at the following member institutions led to the failure of RISDIC: Jefferson Loan and Investment Company suffered losses on lease investments purchased from two firms that had since failed; Heritage Loan and Investment Company's loan portfolio suffered substantial losses and its president was charged with embezzling $13 million; Marquette Credit Union had a negative net worth of $30 million; Davisville Credit Union had a negative net worth of $18 million; and Rhode Island Central Credit Union had a negative net worth of $19 million and suffered a major run in December of 1990. When Rhode Island Central Credit Union was denied additional loans from the Rhode Island Credit Union League's Corporate Credit Union, the RISDIC board met on December 31, 1990, to assess the situation and asked that a conservator be appointed. On January 1, 1991, within a few hours of taking office, the governor of Rhode Island issued an Executive Order closing all 45 RISDIC insured institutions. There were 35 credit unions, seven loan and investment companies, and three banks or trust companies. All closed institutions were ordered to apply for federal insurance. Depositors at nine closed institutions were only allowed to withdraw up to $12,500. By February of 1991, only 27 institutions had reopened. Two had gone out of business (with no losses to depositors) and two were not depository institutions at the time of closing. Fourteen institutions remained closed. Legislation was enacted to create the Rhode Island Depositors' Economic Protection Corporation (DEPCO). The state issued $150 million to assist in providing 100 percent coverage for all deposits up to $100,000 and partial insurance for deposits over that amount in the 14 closed institutions. The bonds were to be repaid from liquidating the failed institutions' assets and from a 0.5 percent increase in the state sales tax. On February 9, 1991, the governor of Rhode Island promised that payments to depositors would be made within 60 days, but by January of 1992, depositors had received only about 10 percent of their deposits. Nine institutions remained closed despite state efforts to sell them. By June 1992, 18 months after the closings, all but 38,000 depositors had received their deposits and those depositors had received 90 percent of their money. Costs to the state of Rhode Island reached $471 million as of June 1992.