Washington Urged To Improve Credit Union Insurance

If Washington credit unions start to fail, the state is wide open to the same financial disaster that hit Rhode Island in 1991, Rhode Island’s former governor warned Friday.

Bruce Sundlun urged state lawmakers to go the way of virtually every other state and require its 77 state-chartered credit unions to sign up for federal deposit insurance.

Credit-union lobbyists are fighting to head off lawmakers who want to force the credit unions to subscribe to federal insurance. The legislators say the current private insurance pool is not enough to prop up the system if credit unions begin to go under.

“Watching Washington state is like viewing a rerun of an old black and white film,” Sundlun told the House Financial Institutions Committee. “The same things are happening here that happened” in Rhode Island and in five other other states when credit union failures sparked more collapses and private insurance associations went broke, he said.

One of every three Rhode Islanders lost access to their money. Most got it back within a few weeks, but the final 3,000 were not paid back, with interest, until last month.

Sundlun rejected the argument that what happened in Rhode Island couldn’t happen in Washington.

“The evidence here is the same as it was in other states where failure occurred: no federal insurance; a private insurer that did not have substantial assets; embezzlements; resistance to state banking authority control and regulation of the private insurer and credit unions; (and) strong political lobbying on behalf of the credit unions to prevent federal insurance.”