What is the name of the U.S. bank that failed in 1984, becoming the largest bank failure in U.S. history at that time? It was Continental Illinois.
Continental Illinois National Bank and Trust Company of Chicago became insolvent in May 1984 after suffering heavy losses tied to energy-sector lending. It had also purchased risky oil and gas loans from the failed Penn Square Bank, whose collapse exposed the weakness of many of Continental Illinois’s assets.
The bank was enormous by contemporary standards, with roughly $40 billion in assets and a nationwide reputation. When depositors lost confidence, large customers withdrew more than $10 billion in early May. Regulators feared that an uncontrolled collapse could destabilize other banks and financial markets.
The Federal Reserve and FDIC arranged a rescue rather than allowing an ordinary liquidation. The FDIC injected billions of dollars, protected most depositors and bondholders, and removed senior management. The episode helped popularize the phrase “too big to fail.” Continental Illinois was later sold to Bank of America in 1994; Washington Mutual surpassed it as the largest U.S. bank failure in 2008.