With federal authorities taking control of Pasadena-based IndyMac Bank on Friday, regulators have all but confirmed the second-largest bank failure in U.S. history. Yet IndyMac is just the latest to join the ranks of worst bank failures in history. Why do blanks implode and who is to blame for the loss of billions? For clues we turn to history, examining some of the greatest financial catastrophes of all time.
Bear Sterns
2008
On Tuesday, March 11, 2008 Bear Sterns catapulted into a full fledged bank failure as everyone from creditors, clients and investors fled the once illustrious Wall Street firm. While Bear Stearns was not an ordinary deposit-taking bank, it had financed huge long-term investments by selling short-maturity bonds, making it vulnerable to panic. The crisis was compounded by credit officers of rival firms saying that Bear Stearns would not be able to make good on its obligations. Within two days, Bear Stearns’s capital base of dwindled to $2 billion from $17 billion in cash, ending with Bear Stearns notifying government officials that it saw little option other than to file for bankruptcy the next day. Total Losses: $15 Billion
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