Here's Why Jefferson County, Alabama, Has to Go Bust

Then the fun really began, as the county binged on financial instruments called interest-rate swaps, and also converted almost all of its fixed-rate debt to variable-rate. The collapse of the bond-insurance industry earlier this year and the speculative nature of swaps and derivatives now have the cost of that sewer debt exploding.

Somehow, the county's citizens have to stop the clock. Then they have to ask why all this happened. Then they have to tell everyone else the cautionary tale so that other public-finance officers don't get into the same mess.

The odd thing about municipal bankruptcy is that it's voluntary. If they had the opportunity, I imagine that the county's creditors, themselves hard-pressed, would have compelled it to enter financial rehab long before now.



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