Continental Illinois had grown to become the largest commercial and industrial lender in the U.S., with loans financed largely through the Federal funds market and large certificates of deposit. Problems beginning with the closure of Penn Square Bank in 1982 placed the bank in a precarious position that eventually required FDIC intervention to rescue what was then the largest bank in Chicago and the sixth largest bank in the U.S.
The "too big to fail" doctrine recognizes the potential for widespread impacts of a single large bank failure.
"For the FDIC, permitting Continental to fail and then paying off only the insured depositors (as had happened in Penn Square two years earlier) was not considered to be a feasible option. With more than $30 billion in uninsured deposits, a liquidity failure would have occurred without FDIC assistance; such a failure could have caused other bank failures and tied up creditors in bankruptcy for years." - FDIC (see right)
The implication is that even large, nominally uninsured deposits must be protected at the largest financial institutions.