The 6 Biggest Companies to Go Bankrupt in the Past 100 Years

We tend to celebrate success in the United States, especially business success. However, all business ventures involve some amount of risk. Sometimes it is a new technology or a recession that causes business failure but it can also be from executives’ criminal activity or even bad weather. In some cases, declaring bankruptcy can clear debt and give the company a way forward; for others it means their end. Below are the six biggest U.S. bankruptcies in the past century.

Lehman Brothers – Investment bank
Lehman Brothers - Investment bank

Lehman Brothers was the fourth largest U.S. investment bank, and its 2008 bankruptcy filing started the 2008 global financial recession. Lehman Brothers management encouraged risk taking among its employees and heavily invested in subprime mortgages and high risk real estate. 


This strategy produced record revenue growth through 2006, but when the real estate market started falling, Lehman Brothers wasn’t able to sell its assets quickly enough to stay afloat. The government regulators at the Securities and Exchange Commission were aware of Lehman Brothers’ risky strategy but did not step in to force it to make a change.


The Lehman Brothers bankruptcy was by far the largest in U.S. history, with $691,063,000,000 in assets. Around 26,200 employees lost their jobs as a result.

Washington Mutual – Savings & loan holding company
Washington Mutual - Savings & loan holding company

Another casualty of the 2007 real estate crash was Washington Mutual. This rather conservative savings and loan bank only derived 14% of its business from home loans, but this was enough to sink it. 


In 2006, real estate values were at a high, but by the end of 2007, they were falling rapidly, especially in California, where the bulk of Washington Mutual’s home loan business was sourced. The bank ended up stuck with loans that were for more than the homes’ values and for this reason, they couldn’t sell them in mortgage-backed securities.


At the end of 2007, it wrote off $1.9 billion, most of which was from defaulted mortgages. Then the collapse of Lehman Brothers caused depositors to panic and pull their money out of checking and savings accounts. The Washington Mutual bankruptcy put over 43,000 out of work. With $327,913,000,000 in assets, it was the largest U.S. bank to ever go bankrupt.


Worldcom – Telecommunications
Worldcom - Telecommunications

Worldcom was the second largest long distance carrier in the U.S. when it filed bankruptcy in 2002. In 2001, it used fraudulent accounting to show a fake earnings increase of nearly $4 billion by booking its operating expenses over time. What should have been reported as a $2.6 billion loss was instead reported as a $1.4 billion profit. 


Worldcom’s CEO Bernard Ebbers and CFO Scott Sullivan were investigated and arrested. Ebbers was convicted on nine counts of securities fraud and sentenced to 25 years in prison. Sullivan was charged with seven counts of securities fraud and sentenced to five years after pleading guilty. 


After the Worldcom bankruptcy, Congress passed the Sarbanes-Oxley Act that required more internal controls for public companies and enacted bigger criminal penalties for securities fraud. Worldcom had $103,914,000,000 in assets. In 2004, it emerged from bankruptcy and changed its name to MCI.

General Motors – Automobile manufacturer
General Motors - Automobile manufacturer

General Motors was the largest American auto manufacturer, but in 2005, it stopped making a profit. Sales of GM cars slowed but the company was not able to reduce its costs, mostly because of union contracts that forbid it to lay off workers and forced it to continue funding generous pension and health insurance costs. From 2005 to 2009, the company lost more than $90 billion and in 2009, it declared bankruptcy. 


GM had $82,290,000,000 in assets at the time of the bankruptcy in 2009. Around 88,000 employees lost their jobs and more would have done so except that the government stepped in. Both the U.S. government and that of Canada provided $30 billion so that GM could continue operating after it declared bankruptcy and lent the company an additional $33.3 billion. 


GM was reorganized to be owned 60% by the U.S. government, 12% by the Canadian government, 17.5% by the United Automobile Workers union and 10% by GM bondholders. Some divisions were sold or discontinued. Just 40 days after declaring bankruptcy, GM emerged from bankruptcy. In 2013, the U.S. Treasury sold the last of its shares in GM, recovering $39 billion of the $49.5 billion taxpayer-funded bailout. 


CIT Group – Banking
CIT Group - Banking

CIT Group is a century-old bank that was one of the largest providers of financing to small and medium-sized companies, particularly in the retail apparel industry. CIT was financed by high cost bonds and short-term debt, which pinched its profit-making ability. 


In 2009, the U.S. government deemed CIT “too big to fail” and provided a bailout of $2.3 billion. This influx of cash apparently was not enough, and the company requested another bailout by the government which was denied. As a result, CIT Group declared bankruptcy later in the year with around $71,000,000,000 in assets. Since then, CIT Group has made a turnaround by reducing debt, abiding by regulatory requirements and shifting its funding from high-cost commercial paper to more FDIC-insured consumer deposits. While the company is profitable now, the government bailout was never repaid.

Pacific Gas & Electric Company (PG&E) – Energy utility
Pacific Gas & Electric Company (PG&E) - Energy utility

PG&E is the only U.S. company to make more than one appearance on the biggest bankruptcies list. It declared bankruptcy in 2001 with $36,152,000,000 in assets and again in 2019 when it had $71,000,000,000 in assets. PG&E is the holding company of the energy utility providing electricity and natural gas to northern California homes and businesses. 

California deregulated its electricity market in 1996, at which point investor-owned utilities like PG&E sold their power generating plants to energy wholesalers, from which they bought the energy. Because a drought reduced the production of hydroelectric power, wholesale energy prices jumped from an average of $30 per megawatt-hour in 2000 to $330 in 2001, causing a $300 million a month deficit for PG&E. In 2003, the state of California bailed out PG&E, allowing it to emerge from bankruptcy the next year, but costing California’s governor, Gray Davis, his job. Above-market prices for energy for PG&E’s customers also made up the gap.

In 2017, equipment owned by PG&E sparked 17 of the 21 major California wildfires, resulting in billions of dollars in damage and destroying thousands of homes. As a result, homeowners and businesses sued the company for liability for around $30 billion total. As part of its bankruptcy plan, the company settled with wildfire victims and successfully emerged from bankruptcy in 2020.