In a controlled study, the authors determined the risk of developing major mental illness after catastrophic financial loss. Seventy-two adults who lost their retirement savings in a bank fraud were interviewed using the Diagnostic Interview Schedule. Major depression by DSM-III criteria was present in 29% of the victims during the first 20 months after their loss as compared with 2% of 66 age, gender, and residential area-matched control subjects (p less than .0001). Generalized anxiety disorder as defined by DSM-III criteria was experienced by 27% of victims after the loss as compared with 10% of control subjects (p = .03). After the loss, victims had lower subjective health ratings, more functional somatic complaints, and higher tranquilizer usage than control subjects. There was no difference between depressed and nondepressed in types of coping responses or use of social supports and confidants. Only four of 21 victims who suffered major depression sought help from a mental health professional. We conclude that catastrophic financial loss may result in the onset of major depressive disorder and generalized anxiety disorder.