If you think bankruptcies mean the last chapter in the organizations’ books, then you’re absolutely wrong. In this article, you’ll notice how some of the biggest bankruptcies in US history were announced as the last attempt to resurrect these flailing companies.
Here are the 10 biggest bankruptcies in US history in terms of assets at the time the bankruptcy occurred:
1. Lehman Brothers ($691B)
The single biggest bankruptcy in the US until this day is that of Lehman Brothers who filed for bankruptcy in 2008. As an investment bank, it had around $691B in assets and was investing a great deal of money in risky mortgages, which soon began to backfire. The bankruptcy of the Lehman Brothers fueled the 2008 financial crisis and it is reported that it had a significant impact on millennials who were just entering the job market at the time.
2. Washington Mutual ($328B)
In second place was commercial bank Washington Mutual (WaMu) with about $328B in assets at the time. One of the major drivers behind the bankruptcy of WaMu was that people were worried after the Lehman Brothers bankruptcy and thus started taking out millions out of the bank. In addition, WaMu was expanding and opening branches too quickly and the housing prices were also declining significantly during the same period. WaMu was then sold to JPMorgan Chase for only $1.9B and declared its bankruptcy a day after in 2008.
3. WorldCom ($104B)
Unlike the top two bankruptcies, the 2002 WorldCom bankruptcy was a result of an accounting fraud that sentenced CEO, Bernard Ebbers, and CFO, Scout Sullivan, to 25 and 15 years in jail, respectively. The extent to which the telecommunication giant cooked the books was so extreme that it inflated its profit by $3.8B and $797M in 2001 and Q1 of 2002, respectively. As a result, WorldCom, among other fraudulent bankruptcies, has led to the introduction of more strict laws and penalties under the Sarbanes-Oxley Act in 2002.
4. General Motors ($91B)
With $82B in assets and $173B in liabilities, General Motors filed for bankruptcy in 2009. However, unlike many other bankruptcies, this one has a slightly happy ending as it was able to emerge from it in almost 40 days with the help of some taxpayers!
5. CIT Group ($80.45B)
When CIT Group filed for bankruptcy in 2009, it was part of its reorganization plan to help them stay in operation. After CIT Group was denied a second bailout, they decided to play it smart and file for bankruptcy, which played in their favor when they were able to come back even stronger!
6. Enron ($66B)
Similar to other bankruptcies, Enron saw its downfall in 2001 after two major hits. First was when Dynegy, another energy company, stopped an $8.4B buyout and later when its shares dropped from $90.75 to $0.26 right before it declared bankruptcy. With the collapse of the company causing significant impact on investors and Wall Street as a whole, Enron’s leaders were found guilty of fraud and tricking investors by hiding the company’s financial weaknesses.
7. Conseco ($61B)
To protect itself from its creditors, insurance and finance company, Conseco filed for bankruptcy in 2002. While its decline was no surprise, the bankruptcy of Conseco, who’s stocks once traded for $58, shook Wall Street.
8. Chrysler ($39B)
One of America’s biggest automakers, Chrysler, was forced to declare bankruptcy in 2009 after some money lenders did not agree to reduce the amount the automaker giant owed them. Following that and in order for Chrysler to stay in business, it signed a merger deal with Fiat, in which the Italian automobile manufacturer would have 20% of the shares with the option of increasing it to 35%. Not only that, but with the concessions of the United Auto Workers and support of money lenders, Chrysler was able to survive.
9. Thornburg Mortgage ($37B)
Another victim of the US financial crisis was Thornburg Mortgage whose shares began to slowly decline in the Summer of 2007. Later on in 2009, the mortgage lender had to turn to bankruptcy to protect itself and never fully recovered.
10. Pacific Gas & Electric ($31B)
In 10th place is Pacific Gas & Electric (PG&E), who has had not one but two bankruptcies in the last two decades. Significantly hit by the energy crisis in the US back in 2001, PG&E filed for bankruptcy due to factors outside of its control. However, its second downfall was due to its own making. The company filed for bankruptcy for the second time in 2020 when one of its power lines caught fire in 2018. This bankruptcy is part of a reorganization plan that is meant to help the company stay afloat and in business. It is even said that the utility giant recovered and dedicated a trust with 22.19% of its shares and $5.4B in cash to support those affected by the fires.
