Since the global financial crisis in 2008, the world has paid close attention to corporations and banks around the world that have faced financial trouble, especially if there is some aspect of scandal involved. The list below gives a brief overview of some of the most notorious company implosions from the last three decades.
1. Freddie Mac and Fannie Mae
In 2008 Freddie Mac and Fannie Mae, two of the largest providers of finance to US home loans, fell on hard times, with the former owing $5.2 billion in July 2008, and the latter reporting a deficit of $10.6 billion the following year. The US government offered billions to prop the two companies up and avoid the US mortgage market grinding to a halt, despite both being insolvent under fair value accounting rules.
2. The Lehman Brothers
One of the most famed and complicated cases of recent years, the Lehman Brothers notoriously filed for Chapter 11 bankruptcy protect in 2008. With the company assets coming to $600 billion, the Lehman Brothers’ downfall signalled for plummeting confidence and stock prices on Wall Street, and harsher scrutiny of a culture in financial organisations for risk taking and extravagant displays of excess.
“You can’t say the word ‘scandal’ without thinking about Enron.”
3. Continental Illinois National Bank and Trust Company
This company became insolvent in 1984 because of bad loans bought from Penn Square Bank N.A. The Continental Illinois National Bank and Trust Company had once been the seventh-largest bank in the US in terms of deposits. An executive at Continental, John Lytle, went to prison for three and a half years after pleading guilty to fraud for “scamming” the company of $2.25 million and stealing nearly $600,000 in bribes for approving risky loan applications.
4. Pacific Gas & Electric Co
PG&E was forced into bankruptcy after California’s deregulation law was passed in 1996, which stopped the company from passing on higher costs to its customers. The company filed for chapter 11 bankruptcy in April 2001, and had accumulated $12 billion in debt and $36 billion in assets at the time of filing.
You can’t say the word ‘scandal’ without thinking about Enron. As one of the more infamous corporate collapses of recent years, the American energy company fell with $63.4 billion in assets, with their share price falling from $90 to £0.10 in the mid-2000s as a result of dodgy accounting practices used to hide loses of billions of US dollars. At the time, this was the biggest bankruptcy in US history. The scandal around Enron is now the subject of countless books, films, and even an award-winning Broadway play.
Featured image: NYC Lehman Brothers building, by Arnoldius (Own work). CC-BY-SA 3.0 via Wikimedia Commons.