ORANGE COUNTY VOICES : The Financial Lessons Not Learned : The area has long attracted scam artists looking for something for nothing. The investment-pool collapse taught us the folly of government seeking essentially the same thing.

Even before this most recent derivative debacle and bankruptcy, Orange County had an image problem that’s now going to be even more difficult to shake.

Simply put, financial scandal is a way of life here.

Charles Keating’s notorious Lincoln Savings and Loan (among numerous others), First Pension, and now the country’s worst government bankruptcy, head a list that includes assorted embezzlements and financial crimes that led federal authorities to dub Orange County the “Fraud Capital of the United States.”

One must consider the unexplained irony (as many around the country already have) in Orange County’s reputation as a bastion of fiscal conservatism and this pattern of scandal. The rise and fall of the S&L; industry, with the virtually universal failure of S&Ls; in Orange County (roughly $10-billion cost to U.S. taxpayers) provides potential answers.

Unfortunately, this expensive lesson was not learned by the public officials who caused the county to follow the S&Ls; into bankruptcy. They essentially tried to get something for nothing, which is anything but fiscal conservatism in action.

Orange County residents wanted first-class government services, but officials didn’t want to tell the public that the services would have a cost--high taxes. The “painless” answer to this problem was to earn extraordinarily high income on investments of county funds.

To maximize that income the county borrowed funds to invest. But there is no free lunch. When you borrow money you have to pay it back--with interest. When you invest money to earn high returns you take very large risks.

We’ve seen this failed strategy before. Betting on interest rates through the use of risky financial instruments sold by Wall street, immense leveraging, and taking huge risk positions were strategies that sank many desperate S&Ls;, and have now led Orange County into the same demise.

With S&Ls;, the evidence shows that this was accomplished by selling such investments to persons who thought they knew something about high finance, and then praising them as geniuses to keep them hooked. Unlike the government bailout of S&Ls;, whose deposits were federally insured and will be paid by generations of American taxpayers, we will most likely pay the bulk of the cost of the county’s debacle ourselves, unless, of course, we betray another tenet of fiscal conservatism, and allow the state to intervene.

There is something terribly wrong with the fact that the conservative ideology of Orange County does not translate into conservative fiscal behaviors. Once the “pain is spread,” however, different attitudes on the part of the public toward paying for services could surface.

Proposals to shrink and streamline government should always be pursued, but at this point are largely ideological “solutions” that ignore both the number of zeros present in the financial loss, and the history and context of fiscal irresponsibility and scandal that characterize Orange County.

Whether we have really learned anything from the S&L; debacle, and now the county bankruptcy, remains to be seen.

One thing is certain; Orange County has given fiscal conservatism a bad rap.

The frenzied quest for something for nothing has produced less than nothing--nearly $2 billion less than nothing in Orange County’s latest financial disaster.