Reflections on the Rhode Island Credit Union Crisis

Stories from the Crisis

In October 2018, the Hassenfeld Institute for Public Leadership hosted an event focused on the Rhode Island credit union crisis of 1991. This event was inspired by a case study on the crisis by Melissa S. Prosky, Ph.d. It also included a documentary film informed by the case study.

As part of our ongoing research on this topic, we are seeking stories from individuals affected by the Rhode Island credit union crisis. These personal reflections, often fraught with painful remembrances, add a depth to the academic rigor of the case study and serve as a reminder of the human toll that can result from failures of public leadership.

Reflection: The Credit Union Crisis Killed Them
Beth McManus Cullen, Newport, Rhode Island

My experience with the Rhode Island credit union crisis still resonates. My parents, Albert and Rose McManus, had their life savings in Davisville Credit Union. On New Years 1991, I was in Bend, Oregon, celebrating the holiday with my husband’s family. I will never forget the moment, hearing in the background, the TV tuned to McNeil Lehrer Newshour. Gov. Sundlun had closed the credit unions! My heart sank. I knew how devastating this would be to my parents. My husband, Mike, had graduated from Harvard Business School just five years before. He frequently warned my dad to spread his accounts out, just in case. Dad didn’t heed that advice. He was under the spell of the Davisville Credit Union branch manager. She made so much of him each time he visited the bank to renew his CDs, which at that time yielded exorbitant interest rates. The axiom, “too good to be true,” is true! She went to jail because of her criminal flattery!

Dad, born in Newport in 1919, lived through the Depression and was a WW II veteran. He met my mom, Rose Evans, from Johnston (ironically, just a half a mile from the credit union) while working in the Supply Department as a CB at Davisville. They married in 1945. The two went on to live a storybook American Dream: four college-educated children, a home they loved in Shore Acres. They earned many joys and comforts. Their careful planning and frugality had resulted in a wonderful retirement, complete with European vacations, helping their children and grandchildren with education and homes. They had a terrific group of friends who gathered often to socialize, play cards, take trips, go dancing. My dad enjoyed golf, sailing, woodworking, and taking art classes. Mom was finally able to relax, knowing the fruits of their simple, solid life were in place.

On that fateful night, so far away from Rhode Island, I knew all this would change, forever. It did. I called them the next morning and tried to make light of the situation, laughing about the “butter bowl” — an old plastic Promise margarine tub my dad kept in his sock draw filled with a roll of cash he had earned selling his “Mac’s Quacks” at craft fairs, a hobby he had, creating amazingly beautiful planters in bird houses. The money did buy simple necessities like groceries and gas, but the troubles caused by the crisis continued for the rest of their lives.

The details of that tremulous time are foggy now, but what remains sharply clear in my mind is, the credit union crisis killed them. It was not long after that my dad’s doctor told him at his next routine physical that he had had a heart attack and that he would need open-heart surgery. Later in 1991, my dad had a triple by-pass. He did well post surgery, but the continued financial issues weighed heavily on them both. His health declined, he suffered a stroke, which later caused a fall, which resulted in a devastating head injury, which disabled his mobility, and by 1999, he was dead.

Mom, heartbroken at the loss of her 57-year love, passed four years later from cancer. Her ability to fight had ebbed, all due to the greed of a few bankers and the malfeasance of corrupt politicians.

Thank you for allowing me a reason to put a piece of this heart wrenching story in writing. It was cathartic. I had buried it.

Reflection: Crisis Had Long-Term Effects on Human Services
William Emmet, Founding Member of the National Alliance on Mental Illness (NAMI) of Rhode Island and former COO of NAMI’s national organization.

I think it’s important to acknowledge that, on some level, all Rhode Islanders were affected by the implosion. Just look at what happened to the state budget as the Sundlun administration grappled with restoring any funds to the families who lost money.

From my narrow perspective at the time, I know mental health and, basically, all human services saw cuts year after year for the balance of the decade and beyond. Sure, there were other factors, but the credit union debacle loomed over government functions in the 1990s in much the way Curt Schilling and 38 Studios have done in recent years. In mental health, this was all the more noticeable because the 1980s had been a time of growth and innovation marked by such initiatives as the housing bond issues of 1986, 1988, and 1990.

From 1991 on, however, mental health advocacy was mostly about figuring out which holes in the leaking ship would be most damaging and then trying to plug them. Gradually, the innovators who had advanced community mental health in RI moved on and the system foundered.

Reflection: Losing Trust in the American Dream
Nancy Thomas, Cranston, Rhode Island

My aging uncle had finally decided to sell the business he had owned and run for all his life, the Latin Quarters Lounge on the Central Falls/Pawtucket line. Having worked from 10 am to 4 or 5 am every day of his life, he looked for a new owner. Years passed. Eventually, he found a man he trusted to keep the business thriving for his customers, who were his lifelong friends and neighbors. The man didn’t have all the money needed to buy the lounge, which included property going all the way back to the Blackstone River. My uncle decided the perfect solution would be to sell it to him for what he could afford to put down at the time, and to hold the mortgage himself. So, two Portuguese businessmen went to the East Providence Credit Union – a traditional Portuguese institution – and did the necessary paperwork.

And then it happened: the credit union crisis. The freeze of funds impacted my uncle’s money. Everything was tied up in the ‘bank.’ He thought he would still have some funds coming in because of the mortgage payment due him every month. But the new owner’s money was also frozen: he couldn’t order product to keep the lounge open and he couldn’t pay the mortgage. My uncle couldn’t pay his bills.

The pride of Portuguese business people had kept generations holding their money in their home – literally under the mattress, in some cases – or in a paper bag out in the greenhouse on the property. Dealing with mortgages and business sales was a whole different thing, however. So they went to a financial institution surrounding the Portuguese community.

Not paying your bills is not an option for these proud people. My uncle grew agitated. He started not to shave. He cut the grass on his four lots of land the day after he had just cut the grass. The hedges were trimmed, and trimmed, and got lower and lower. One day, we found him sitting on the steps, and he was white. He had had a heart attack. It wasn’t severe, but it impacted his “heart and soul” more than his physical heart.

Eventually funds were released and things continued on. But the business never recovered and eventually was sold as so much real estate and land. My uncle was never the same. He grew bitter and angry. He mistrusted people. He said things he never would have said before. Our relationship ended. He eventually died late in his 90s. I was told about it in a phone call. He never forgot the moment when his trusting cash business had been frozen in time. He lost trust — trust in the American dream, trust in his family, trust in his friends. He lost his health, his spirit. And we all lost him, too.

Reflection: Crisis Turns into a Road Trip
Maggie Bulmer, Middletown, RI

My story is not a terrible one of loss of retirement income. It does, however, show that the credit union crisis affected people, whether or not they had money in a credit union.

I had traveled in my Toyota camper and enjoyed trips with my daughter, a friend and my golden retriever. Now it was time to sell the camper, but after the credit unions closed, there was no one in Rhode Island who could or would buy it. Enter my Alaskan brother and his wife, Tom and Joyce. They had planned a trip to Florida to look for retirement locations. My camper was not being used or sold, so I offered it to them to travel from Rhode Island to Florida and back.

While in Florida my brother Tom met up with another of our brothers, Marty — two very competent mechanics and fun-loving guys. They covered the Tampa area, visiting used car lots looking for a buyer for my camper. Their plan was to trade one slightly used camper for one slightly used passenger car. What a plan!

Eventually Tom and Marty negotiated a wonderful blue car (I buy cars by color…not make or model) that Tom & Joyce drove to New Jersey. We had a wonderful sibling reunion including mechanic brother #3 and went back to our respective states and homes with wonderful stories to tell about my vehicle problem, which transformed into an adventure.