Orange County, California bankruptcy

In 1994, Orange County, California, filed for bankruptcy, marking one of the largest municipal bankruptcies in U.S. history. This crisis arose from risky investments made by county officials, particularly in high-risk financial instruments, which resulted in significant losses. When interest rates rose, the county could not cover its debts, leading to a $1.64 billion shortfall. The bankruptcy prompted severe budget cuts, staff layoffs, and a re-examination of investment practices. Ultimately, it highlighted vulnerabilities in public finance and affected the county's reputation, leading to reforms in fiscal management and increased scrutiny of local government investments.