Penn Square Bank

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Penn Square Bank was a small commercial bank located in the rear of Oklahoma City's Penn Square Mall. For most of its life, the bank made loans to local businesses and was operated conservatively. The bank then became famous for granting high-risk energy loans during the late 1970s and early 1980s Oklahoma and Texas 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. Other banks throughout the nation relied upon Penn Square to judge the quality of these energy loans, and these banks purchased over $1 billion of "loan participations" from Penn Square. Because Penn Square over-valued the assets supporting its energy loans, Penn Square Bank failed in July 1982. Until the Penn Square failure, the Federal Deposit Insurance Corporation (FDIC) would find a buyer for every failed bank and would arrange for the purchasing bank to pay all depositors in full. However, the FDIC could not find any bank that was willing to purchase Penn Square's deposits. As most of the deposits came from other financial institutions and represented high interest-rate jumbo certificates of deposit above the $100,000 FDIC insurance limit, many depositors lost money in the Penn Square failure. The FDIC later found 451 possible criminal violations at Penn Square.[1][2][3]

Most experts view the Penn Square failure as the cause of the later collapse of Continental Illinois National Bank and Trust Company of Chicago, which had to write-off over $500 million in loans purchased from Penn Square. In addition, Penn Squre caused major losses at other banks, including Seattle First National Bank (which was forced into a merger with Bank of America), Michigan National Bank, and Chase Manhattan Bank in New York. The bank's collapse marked the start of the 1980s oil glut and Penn Square was the first of 139 Oklahoma banks that failed in the 1980s. Penn Square's 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.[4][5]

Further reading

Zweig, Phillip L. (1986). Belly Up: The Collapse of the Penn Square Bank. Ballantine Books. ISBN 978-0449902059. 

Singer, Mark (2004). Funny Money. New York: Mariner Books. ISBN 978-0618197279. 


  1. Singer, Mark (1985). Funny Money. Dell Publishing Co., Inc.. ISBN 0-440-52576-4. 
  2. FDIC history of the Penn Square Bank failure
  3. New York Times Article - 'MICKEY MOUSE IN OKLAHOMA'
  4. Oklahoma City civic leader dies. Amarillo Globe-News (January 4, 2003).
  5. Nichols, Max. "Commentary: Taking a second look at Funny Money", The Journal Record.