Funny Money Summary

Funny Money

Mark Singer has written a colorful account of the Penn Square Bank, from its beginnings to its untimely demise. Located in an Oklahoma City shopping center, Penn Square Bank was the source of unsecured loans of vast proportions to oil and gas entrepreneurs. In the course of a few years, Penn Square “owned a portfolio of uncollectible loans whose face value exceeded the bank’s capital.” Bankruptcy was inevitable.

The bankruptcy of Penn Square had far-reaching consequences--for the bank’s officers, for the oil and gas industry, and for the nation’s banking system. Penn Square had acted as “loan broker” by arranging loans between a borrower and a larger financial institution, and collecting a fee. One of these larger financial institutions was the Continental Illinois National Bank and Trust Company of Chicago. By 1982, Continental included on its books more than “a billion dollars worth of loans that had originated at Penn Square.” Penn Square’s fall meant substantial loss of money and prestige for Continental; reorganization and Federal support was needed for the Chicago-based institution.

Singer provides background and biographical data for many of the principals involved, including Bill P. Jennings, chairman of Penn Square; Robert A. Hefner III, an oil and gas entrepreneur and a heavy Penn Square borrower; John Lytle, vice president of Continental Illinois National Bank; William G. Patterson, head of oil-and-gas lending at Penn Square; and Carl Swan, oilman and Penn Square borrower. Much of Singer’s research is based on interviews with key people in the Penn Square story.