ORANGE COUNTY IN BANKRUPTCY : SEC Chairman Urges Voters to Oust Board of Supervisors

In a harsh rebuke to Orange County officials, Securities and Exchange Commission Chairman Arthur Levitt Jr. suggested voters throw out the officials who let the county’s financial crisis happen.

Levitt said the county board of supervisors failed to adequately supervise former Treasurer Robert Citron, who lost $2 billion in taxpayer money wagering that interest rates would fall this year.

Supervisors never challenged the wisdom of Citron’s investments, which included derivatives that lose value quickly when interest rates increase.

“If your supervisors are so lax that they allow you the unique power, without oversight, to make that kind of speculation, I think the voters of that community should throw the whole bunch of (them) out of office,” Levitt said. The chairman made his comments to a luncheon meeting of the Town Hall of Los Angeles on Thursday.

Levitt’s comments came less than a week after the county’s top administrator accused him of turning a deaf ear to the county’s financial crisis.

On Sunday, Ernie Schneider, the county’s chief administrative officer, complained that despite “a major pitch to the SEC” for help, “they just weren’t interested in helping us at all.”

Levitt said he refused the county’s request for him to impose a moratorium on collateral sales by brokerage firms that lent the county billions of dollars.

The county filed for bankruptcy on Dec. 6 after CS First Boston seized about $2 billion of securities held as collateral for loans to the county.

“I told him at that time I felt that would be an inappropriate interference in the market process that would be tantamount to closing the stock markets,” Levitt said.

But he said he did his best to help the county, calling the brokerage firms, and asking them to be more cooperative with the county.