Penn Square Bank was a small American

commercial bank A commercial bank is a financial institution that accepts deposits from the public and gives loans for the purposes of consumption and investment to make a profit. It can also refer to a bank or a division of a larger bank that deals with whol ...

located in

Oklahoma City, Oklahoma Oklahoma City (), officially the City of Oklahoma City, and often shortened to OKC, is the List of capitals in the United States, capital and List of municipalities in Oklahoma, most populous city of the U.S. state of Oklahoma. The county seat ...

. The bank made a large number of poorly

underwritten Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liability ...

energy-related loans that it sold to other banks. Losses on these loans led to significant financial problems in these banks. Penn Square Bank declared bankruptcy in July 1982.

History

The bank was founded in 1960 and was located in the rear of the Penn Square Mall in

Oklahoma City Oklahoma City (), officially the City of Oklahoma City, and often shortened to OKC, is the List of capitals in the United States, capital and List of municipalities in Oklahoma, most populous city of the U.S. state of Oklahoma. The county seat ...

. The bank made its name in high-risk energy loans during the late 1970s and early 1980s

Oklahoma Oklahoma ( ; Choctaw language, Choctaw: , ) is a landlocked U.S. state, state in the South Central United States, South Central region of the United States. It borders Texas to the south and west, Kansas to the north, Missouri to the northea ...

and

Texas Texas ( , ; or ) is the most populous U.S. state, state in the South Central United States, South Central region of the United States. It borders Louisiana to the east, Arkansas to the northeast, Oklahoma to the north, New Mexico to the we ...

oil boom. Between 1974 and 1982, the bank's assets increased more than 15 times to $525 million and its deposits swelled from $29 million to more than $450 million. As a result primarily of irresponsible lending practices in connection with the sale of over $1 billion in "loan participations" to other banks throughout America, Penn Square Bank failed in July 1982. Unlike most previous bank failures since the

Federal Deposit Insurance Corporation The Federal Deposit Insurance Corporation (FDIC) is a State-owned enterprises of the United States, United States government corporation supplying deposit insurance to depositors in American commercial banks and savings banks. The FDIC was cr ...

(FDIC) was formed, the uninsured depositors suffered losses as no other bank was willing to assume the deposits. As most of the deposits came from other financial institutions and represented high interest-rate jumbo certificates of deposit that were largely uninsured, this represented a major loss for the depositors. The investigation by the FDIC after the bank failure uncovered 451 possible criminal violations. The bank is often cited as being partly responsible for the collapse of

Continental Illinois National Bank and Trust Company The Continental Illinois National Bank and Trust Company was an American bank established in 1910, which was at its peak the seventh-largest commercial bank in the United States as measured by deposits, with approximately $40 billion in assets. ...

Chicago Chicago is the List of municipalities in Illinois, most populous city in the U.S. state of Illinois and in the Midwestern United States. With a population of 2,746,388, as of the 2020 United States census, 2020 census, it is the List of Unite ...

, which had to write off $326 million in loans purchased from Penn Square. In addition, there were major losses at other banks, including Seattle First National Bank, Michigan National Bank, and

Chase Manhattan Bank JPMorgan Chase Bank, N.A., doing business as Chase, is an American national bank headquartered in New York City that constitutes the consumer and commercial banking subsidiary of the U.S. multinational banking and financial services holding ...

in New York. The bank's collapse coincided with the

1980s oil glut The 1980s oil glut was a significant surplus of crude oil caused by falling demand following the 1970s energy crisis. The world price of oil had peaked in 1980 at over US$35 per barrel (equivalent to $ per barrel in dollars, when adjusted f ...

and Penn Square was the first of 139 Oklahoma banks that failed in the 1980s. The insolvency was the subject of two best-selling books and led to a two-year prison term for the bank's energy-lending chief, Bill Patterson.

Penn Square alumni

* Bill P. (Beep) Jennings (b. 1923, d. 2003) * William G. "Bill" Patterson
Laurence Francis Rooney Jr.
(b. 1925, d. 1980)

William Eugene Rowsey III

References

External links

FDIC history of the Penn Square Bank failure

* PENN SQUARE BANK FAILURE; HEARINGS BEFORE THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS; HOUSE OF REPRESENTATIVES; NINETY-SEVENTH CONGRESS; SECOND SESSION; PART 1; JULY 15; AND AUGUST 16, 198

* PENN SQUARE BANK FAILURE; HEARINGS BEFORE THE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS; HOUSE OF REPRESENTATIVES; NINETY-SEVENTH CONGRESS; SECOND SESSION; PART 2; SEPTEMBER 29 AND 30, 198

* FAILURE OF PENN SQUARE BANK; HEARING BEFORE THE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS; UNITED STATES SENATE NINETY-SEVENTH CONGRESS; SECOND SESSION; DECEMBER 10, 198

* "Breaking the Bank" OETA Television; May 5, 201
Belly Up: The Collapse of the Penn Square BankFunny Money
Banks based in Oklahoma Companies based in Oklahoma City Defunct banks of the United States Banks established in 1960 Banks disestablished in 1982 Defunct companies based in Oklahoma 1960 establishments in Oklahoma 1982 disestablishments in Oklahoma Bank failures in the United States

History

Penn Square alumni

References

Further reading

External links