Rhode Island to Probe Bank Crisis

State lawmakers will conduct a formal inquiry into events leading to a statewide banking crisis that shut down 45 institutions and cut off Rhode Islanders from $1.7 billion in deposits, legislative leaders said Monday.

The probe will be conducted by the House Judiciary Committee, whose chairman, Jeffrey Teitz (D-Newport) said his committee will be thorough in its inquiry, regardless of whether it focuses on prominent House members.

“Nothing will be outside the purview of this inquiry,” Speaker Joseph DeAngelis (D-Smithfield) promised.

Some of the most powerful leaders of the House have been roundly criticized for failing to head off the crisis when they had a chance to five years ago.

The judiciary committee will look into the collapse of the Rhode Island Share & Deposit Indemnity Corp., a private firm that insured the 45 institutions and wielded considerable clout in the Legislature.

RISDIC was crippled financially last year by the failure of two loan and investment firms it insured. The most recent and damaging was the Heritage Loan & Investment Corp. of Providence, whose president, Joseph Mollicone Jr., has been missing for two months.

A warrant has been issued for his arrest. It charges Mollicone with embezzling $13.8 million.

RISDIC entered conservatorship Dec. 31, leaving the 45 credit unions and banks without insurance. Gov. Bruce Sundlun shut down the institutions Jan. 1 to prevent runs on deposits. His action froze 300,000 accounts and $1.7 billion in deposits.

Twenty-two small credit unions have been able to obtain federal insurance and reopened Monday, but 16 credit unions and banks remain without insurance. They account for $1.4 billion of the deposits Sundlun froze.

House members could have prevented the crisis by passing legislation in 1986 that would have closed RISDIC and required the 45 institutions to get federal insurance.

Sundlun late Sunday announced an emergency plan to compensate those who lost access to their money after the banks were shut.