Fox News analyzed it this way: “It was like refinancing your house and dumping the proceeds into the Wall Street market and hoping your earnings go up faster than the interest rate on your loan,”
By 2009, the city began slashing its budget to stay afloat. The police department lost 25 percent of its 441 sworn officers and the fire department was cut by 30 percent. City staff was cut by 40 percent. The city general fund budget, now $155 million, has been cut by $90 million over three years.
The impacts were felt everywhere. Wells Fargo bank seized three parking garages when the city defaulted on the $32 million in bonds that financed them. Bond holders also seized the $40 million downtown high rise that was to become City Hall.
Stockton recorded its highest-ever number of murders in 2011 and 2012, and had three just last Sunday. Last year, an FBI analysis of violent crime made it the 10th most dangerous city in the U.S. Its unemployment rate is 17.5 percent, and it has the third-highest illiteracy rate in the country.
On December 6, 1994, the County of Orange filed for Chapter 9 bankruptcy protection. County officials believed this action was necessary because of market losses to the Orange County Investment Pool (OCIP) estimated at the time to exceed $2,500,000,000.
Due to a favorable selling environment, the actual losses were later tabulated at about $1,500,000,000. The OCIP had been leveraged to $21 billion dollars.
Subsequently, the Orange County (CA) District Attorney’s Office opened an investigation to determine criminal culpability. The scope of the investigation was designed to examine whether or not a crime(s) occurred in connection with events that culminated with the bankruptcy filing.
This publication is a historical account of the largest municipal bankruptcy (at date of this publication) in the history of the United States of America.
Yes it’s a shameless plug for one of my books but I ran this investigation so I do know a bit about municipal bankruptcy and about the matter of cause and effect in this regard. The book is a dry read and discusses in detail how and why. $4.99 on Kindle.
Irresponsibility by government leaders has consequences.
Spending it as if you stole it has consequences.
We’ve become a nation drunk on other people’s money and the symptoms are everywhere.