The FDIC had long known of its problems. The bank had first approached failure in July 1982, when the Penn Square Bank, which had partnered with Continental Illinois in a number of high-risk lending ventures, collapsed. However, federal regulators were reassured by Continental Illinois executives that steps were being taken to ensure the bank's financial security.
The FDIC had long recognized its challenges. In July 1982, Penn Square Bank, which worked with Continental Illinois on risky loans, failed. However, federal authorities were consoled by Continental Illinois officials who claimed that steps were being taken to secure the bank's financial health.