Funny Money - Mark Singer

[Saluki]

History doesn't repeat, but it rhymes.  This is a great book I read years ago about the Penn Central Bank Collapse. Penn Central was a small Oklahoma bank that was making loans in the Oil industry during the boom times.  Big banks like Continental Illinois (which was the 2nd largest bank collapse in US history up until last week), was buying up a lot of these loans. When things went south, Continental was hit bad by these loans and then when the 1987 crash happened they were wiped out (A broker that they had purchased was badly run and the losses were the final blow). 

 

The collateral on a lot of these loans were near worthless.  Casings and pipes for drilling rigs can be sold for scrap, but a drill bit for an oil rig is kind of expensive and there are no uses for it besides oil. 

 

https://www.amazon.com/Funny-Money-Mark-Singer/dp/0618197273/ref=sr_1_3?crid=1DJMI6PPCX4ZD&keywords=penn+central+bank+failure&qid=1678675770&sprefix=penn+central+bank+failure%2Caps%2C236&sr=8-3

 

A bank that specializes in one industry (even an extremely profitable one like the tech industry) is a risky proposition on the best days. When you match that with paying depositers  short term and investing long term, like during the Savings and Loan crisis, you are doubling down on risk.  

 

Most people never heard of Penn Central but the collateral damage it did took out a giant bank.  I hope the SIVB damage is contained with the Government involvement and bailout, but it very easily could have damaged many companies who were customers and would be unable to make payroll because the bank took stupid risks to get a few extra basis points of profit. 

[Gamecock-YT]

Belly Up by Phillip L. Zweig is another good Penn Central book.