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When Government FailsThe Orange County Bankruptcy$
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Mark Baldassare

Print publication date: 1998

Print ISBN-13: 9780520214859

Published to California Scholarship Online: March 2012

DOI: 10.1525/california/9780520214859.001.0001

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Events Leading up to the Bankruptcy

Events Leading up to the Bankruptcy

Chapter:
(p.88) Chapter 4 Events Leading up to the Bankruptcy
Source:
When Government Fails
Author(s):

Mark Baldassare

Publisher:
University of California Press
DOI:10.1525/california/9780520214859.003.0004

The Orange County financial crisis came suddenly, but not without warning. Throughout 1994, there were people saying that County Treasurer Bob Citron was taking too many risks with the Orange County Investment Pool. The magnitude of the financial problem was underestimated by almost everyone. Even those who had a suspicion of difficulties were surprised at the size of the losses. This chapter examines the important events leading up to the fiscal crisis in December 1994. This was not the usual bankruptcy scenario of a troubled central city with declining revenues and rising expenditures. The local governments in Orange County were considered highly creditworthy up until the very end. Their downfall was the result of an overwhelming desire to live beyond their means by increasing their local revenues. They could not say no to the interest income that was gained through risky investments.

Keywords:   Orange County, bankruptcy, fiscal crisis, Investment Pool, Bob Citron, revenues, expenditures, interest income, investments, local governments

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