Franklin National Bank, established in 1927 in New York City, grew rapidly during the post-World War II era, becoming one of the prominent banks in the United States. However, by the early 1970s, it began to experience significant challenges. Mismanagement combined with aggressive speculation in the foreign exchange market and risky lending practices led to mounting losses. Investigations revealed widespread fraud, particularly involving falsified records and misleading financial statements to cover up the bank's deteriorating condition. The situation escalated when the bank was unable to meet withdrawal demands and was declared insolvent on October 7, 1974. 

The failure of Franklin National Bank marked a pivotal moment in American banking history as it was the largest bank failure in U.S. history at the time, leading to significant repercussions across the financial sector. Following its collapse, the Federal Deposit Insurance Corporation (FDIC) stepped in to protect depositors, ensuring that most customers were reimbursed for their losses. The events surrounding the bank's collapse prompted a reassessment of banking regulations and corporate governance. In 1975, considerable reforms were initiated to enhance the regulatory framework governing banks, focusing on risk management and transparency in financial reporting.