Robert Lafee Citron (April 14, 1925 – January 16, 2013) was the longtime Treasurer-Tax Collector of Orange County, California, when it declared Chapter 9 bankruptcy on December 6, 1994.
The bankruptcy was brought on by Citron's investment strategies,[2] which seemed to be an effort to earn high incomes for the county, without raising taxes, through risky, leveraged positions in bonds.
[7] As controller of the various Orange County funds, Citron had taken a highly leveraged position using repurchase agreements (repos) and floating rate notes (FRNs).
The loss incurred by the use of these financial instruments reached the amount of $2 billion and was caused by being too highly leveraged for rising federal interest rates.
[8] At that time, the Federal Reserve Bank began to raise US interest rates, causing many securities in Orange County's investment pools to fall in value.
Financial scholar John C. Hull later described the incident as "the classic example" of an institution initially earning a profit through risky trades, becoming complacent about risk as a result, and then making disastrous losses.
[11] Charges also included filing a false and misleading financial summary to participants purchasing securities in the Orange County Treasury Investment Pool.