A surfer rides a wave beside Huntington Beach pier as participants at the annual Pier Plaza Plunge spend some time in the chilly waters of the Pacific Ocean at Huntington Beach, California, for the New Year's Day tradition on January 1, 2014.; Credit: FREDERIC J. BROWN/AFP/Getty Images
In the early 1990’s OC Treasurer-Tax Collector Robert L. “Bob” Citron made billions of dollars for Orange County, its city governments, water districts and school districts with a heavily-leveraged investment scheme. It borrowed against fairly vanilla fixed-rate bonds in order to invest in derivative securities that paid big returns as long as interest rates stayed low. It’s a risky scheme, and for a while, it made a lot of money, so much so that Citron and his assistant, Matthew Raabe, began cooking the books to make the investments looked more stable than they were.
Throughout 1994 interest rates continued to rise and Citron’s leverage began to collapse. On Dec. 6, 1994, Orange County declared bankruptcy. It was the largest municipal bankruptcy ever seen and the fallout continued for years.
Guests:
Chris Knap, former Staff Writer, Orange County Register; current editor, KPCC
Norberto Santana Jr., reporter and chief editor for Voice of OC, a non-profit investigative news agency