RIPR News
1:41 pm
Mon January 3, 2011

COMMENTARY: The inauguration day some would like to forget

PROVIDENCE, R.I. – There is a simple majesty to an inauguration. From the State House to the White House, these occasions of high theater remind us of the enduring rhythm of our democracy: Governments in America change not with tanks in the streets, but with a peaceful transfer of the reins of power.

The clamor of the election is over, and now, the victor, and often, the vanquished, sit side by side as the baton is passed. The speeches and sentiments are lofty and the pledges to work together make the politicians appear sincere. Even the hugs and handshakes look heartfelt.

That is the traditional ceremony. After a hard-fought campaign Chafee deserves no less tomorrow.

But Rhode Islanders of a certain age will never forget the scene 20 years ago, when Governor Bruce Sundlun took over on New Year's Day from outgoing Governor Edward DiPrete. New Year's Day dawned clear and chilly. A strong sun washed over the snow and glistened off the marble State House as Rhode Island readied for Sundlun's inauguration. But inside the capitol, storm clouds circled. Before Sundlun was sworn in, he was to make an unprecedented decision: to close every credit union and financial institution - 45 in all -where the deposits were insured by the Rhode Island Share and Deposit Indemnity Corporation, which became notoriously known by its acronym, RISDIC.

Some of Sundlun's staff, most notably legal counsel and now U.S. Senator Sheldon Whitehouse, had been up all night trying to figure out how to deal with the collapse of the insurer that was supposed to cover more than a billion dollars in deposits owned by 300,000 depositors.

Rhode Islanders would later learn that a group of crooked bankers and their friends in the General Assembly and in DiPrete's administration conspired to keep these banks under state regulation, rather than force them to comply with stricter federal rules that would have avoided the crash.

The transition between DiPrete and Sundlun was rocky. It was so bad that shortly before Christmas, DiPrete refused to even attend a meeting with Sundlun and Terry Murray, who was then the head of Fleet Bank, at the time the state's largest financial institution to talk about the crisis.

On the last day of 1990, the RISDIC board voted to dissolve the insurer, throwing itself on the mercy of the state. Sundlun asked Whitehouse, ``what the hell does that mean?''

Whitehouse's reply: ``It means we own them.''

David Preston, Sundlun's communications director, recalls being summoned from his task of polishing the governor's inaugural address to a meeting the day before the inauguration. Sundlun had little choice but to close the banks and take them into a form of state receivership.

The inauguration ceremony was held, but no one much remembers anything about it. The headlines the next day were all about the banking mess.

At the time, our state was portrayed in the national media as New England's Third World state, a backwater run by slippery politicians and sleazy bankers.

After a year of debate, protests and investigations, the General Assembly agreed to a state bailout of all the depositors. The state borrowed $700 million and the federal government helped a bit with loan guarantees.

Rhode Islanders learned the hard way that corruption has consequences. Never in the state's history had scandal reached so deeply into pockets and psyches of citizens. The money spent on the RISDIC bailout could have been used for roads, parks, schools and support of the state colleges.

Our state is not in great shape now. We have a poor economy, a looming state budget deficit of more than $300 million and one of the nation's highest unemployment rates. Still, Lincoln Chafee is poised to have a better Inauguration Day tomorrow than Bruce Sundlun did 20 years ago.

Do you have insight or expertise on this topic? Please email us, we'd like to hear from you. news@wrni.org.