Enough already

BALANCING the budget is hard enough for the most prudent bits of local government. So imagine what it is like for Orange County, a collection of ageing industrial towns and spiffy new “edge cities” to the south of Los Angeles, which was responsible, in December 1994, for the most spectacular municipal bankruptcy in American history. Orange County's heavily leveraged investment fund, which was positioned on the assumption that interest rates would stay steady, suffered a loss of $1.9 billion when rates rose instead. The county, one of America's largest and wealthiest, defaulted on several bond issues and was forced to borrow more than $1 billion to pay its bills.