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New York City Financial Crisis Summary

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A financial crisis is a circumstance in which the worth of financial establishments or assets plummets quickly. A financial crisis is frequently related to a panic or a run on the bank. When this occurs, investors tend to sell assets or associated with a panic or a run on the banks, in which investors sell off assets or take out money from banking accounts with the anticipation that the value of those assets will decrease if they stay at a financial institution (Investopedia, 2016). The purpose of this paper is to provide a summary of the financial crisis of New York City and Orange County.
New York City Financial Crisis
The financial crisis of New York City occurred in April of 1975. This happened because New York City was at the point of defaulting on their obligations. This was a true financial crisis because one of the largest cities had run out of money and …show more content…

Not only did higher interest rates come into play, the financial community required more detailed financial disclosures. Before the crisis occurred, the state and local governments had sold their bonds without disclosing much about their financial situation. Because of New York’s actions, it did little to reassure the financial market. To bring control to the city’s budgeting, the Emergency Financial Control Board was created. The Emergency Control Board had control over the city’s finances. They could control the city’s bank accounts, issue orders to city officials, remove them from office, and press charges against city officials (Dunstan, 1995). The state law that created the control board required that the city balanced its budget within three years. Besides the creation of the control board, other measures were taken to prevent another financial crisis such as this from occurring again. The federal government became involved because of the concerns over the impact of a

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