The Orange County Bankruptcy and its Aftermath

The authors study the composition of the Orange County Investment Pool on December 1, 1994. They find that the pool was neither illiquid nor insolvent and that its financial condition did not mandate bankruptcy. If the pool had not been liquidated but had instead been allowed to follow its hold-to-maturity strategy, Orange County would not only have avoided the losses it realized and reported but also would have generated substantial cash inflows during 1995.