Californian city declared bankrupt 'over-extended itself'
2 April 2013 Last updated at 14:52 BST
Stockton in California is the latest city in the United States to go bankrupt.
The BBC's Jane Little told John Humphrys how Stockton had over-extended itself:
"It built a gleaming new sports arena, developed its waterfront, and created a whole new city hall which it then couldn't afford to move workers in to because we saw the housing bubble burst, and it saw its tax revenues which came mainly from property taxes plummet."
First broadcast on BBC Radio 4's Today programme on Tuesday 2 April 2013.