21 June 1970: Penn Central collapses into bankruptcy

On June 21, 1970 Penn Central Transportation, formed two years earlier by merging two great railroads, filed for bankruptcy, then the largest in US history. Its commercial paper, short-term IOUs bought by other companies as if they were cash, suddenly became doubtful. The Fed had to support the money markets. Investors learned that a famous name and a big balance sheet are no guarantee of safety.

The lesson: A merger of two weak businesses rarely makes a strong one; it often just makes a bigger problem.