THE SQUEEZE ON ORANGE COUNTY

Stung by tremendous losses in its investment fund related to high risk securities known as derivatives, Orange County (Cal.) may seek bankruptcy protection to stop investors from withdrawing their money, according to congressional officials. The fund has lost $1.5 billion of its value, falling from $20 billion to $18.5 billion this year and Rep. Christopher Cox (R.-Cal.), whose district includes part of Orange County, says the municipality may file a bankruptcy petition soon. The news was a shock because the wealthy, suburban Republican bastion has long been considered a model for sound financial management. About 185 cities, school districts and other government agencies have money in the county's investment fund. While the losses have made waves locally -- costing the county treasurer his job and bringing scrutiny from federal officials and bond rating services -- reverberations from this disaster won't be limited to the Golden State, says TIME business reporter Bernard Baumohl. "There is now a massive investigation underway by municipalities around the country to see if they are in the same predicament as Orange County," says Baumohl, adding that pension funds, surplus funds and other revenues wagered on derivatives may have evaporated as interest rates have risen. "There's a very good chance that this is much more widespread than anyone cares to admit."