PLATFORM : Perils of Default

State Treasurer MATT FONG says that bond defaults are not an option for Orange County:

Orange County officials are playing financial Russian roulette if they don’t immediately rule out payment defaults on the county’s debt obligations. The damage caused by the county treasurer’s flawed investment strategy is not so severe as to sound the county’s death knell as a viable public entity.

Orange County continues to function. Schools are open, ambulances respond to calls and sheriff’s deputies enforce laws. Another important but less visible continuing function is the obligation to repay all county debts in full and on time.

A commercial business defaulting on its obligations and seeking protection under appropriate bankruptcy laws has the ability to re-establish itself, “legally untainted” by the failure of the former enterprise. It is not realistic to think that Orange County or any other government entity has that ability. Orange County cannot change its name and cease business at its current location and move elsewhere for a fresh start. The financial markets will long remember Orange County if it fails to pay its debts. The pain would be immense, far-reaching and long-lasting.