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At the end of Ghostbusters, we see the titular team save the day by crossing the streams and destroying Gozer's form. Five years later, in Ghostbusters II, they've been disbanded, sued by the city for property damage and are bankrupt. However, it can hardly be said it was their fault. The only thing they could reasonably be blamed for was the fact that Gozer's took the form of Stay Puft, but Gozer taking a form was inevitable. They were not at fault for the actual coming of Gozer or most of the damage caused, as far as I can tell.

Why were the Ghostbusters blamed for the damage and disbanded?

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    Two things to keep in mind: 1) politicians, despite the popularity of the Ghostbusters, wanted these guys gone because they repeatedly see them as a menace to NYC society. The damage to the city was their "in" to get them out of the way, even after they had saved the city from Gozer. 2) people are people. Even in NYC. Eventually the "honeymoon" around the Ghostbusters had worn off, and people began to look elsewhere for popularity. This is evidenced in the birthday party scene. The Ghostbusters had clearly lost their luster with NYC........even the kids didn't think they were cool anymore. – MissouriSpartan May 20 at 17:45
  • I know Peck wanted them gone, he believed them to con artists, but do we ever see anything to suggest other politicians dislike them? The Mayor even gives them the go-ahead for the final battle. Albeit it's only because of votes. – Gremer May 20 at 17:51
  • See my second point – MissouriSpartan May 20 at 17:52
  • Also, keep in mind, there was a lack of ghost activity between the first and second movie. I agree with @MissouriSpartan, but even if it weren’t for the pressure from bureaucrats, they had no ghost hunting income, so disbanding was inevitable. – UnhandledExcepSean May 20 at 19:23
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    There's probably no satisfying in-universe explanation. The reason is that they again need the story arc of the underdogs battling not only an evil force, but everyone else also puts obstacles in their way (and doesn't believe them). It's a Sequel Reset and to some extent a Happy Ending Override. – Anne Daunted May 21 at 14:25
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Short version

They went out of business, because

  1. They were sued
  2. They were banned from ghostbusting
  3. No paranormal activity until the events of Ghostbusters II
  4. People didn't believe them

Long version

From the script by Harold Ramis and Dan Aykroyd (1989.02.27):

  1. They were sued

Speaking to Hardemeyer

VENKMAN: No, that's what I want to talk to the mayor about. We did a little job for the city a while back and we ended up getting sued, screwed and tattooed by deskworms like you.

  1. Banned from ghostbusting

Speaking to Venkman

STANTZ: Hey, hey, hey, stresshound! Are you nuts? If anybody found out about this we'd be in serious trouble. The judge couldn't have been clearer - no ghostbusting.

  1. No paranormal activity

Cars and trucks swerve and hit their brakes as Dana runs into the intersection and snatches up the baby. She hugs it close, deeply relieved, then looks at the buggy with the dawning awareness that the supernatural has re-entered her life.

At that time, Vigo hadn't taken control of Janosz yet. This may be somewhat weak evidence, but there was obviously not enough paranormal activity for the Ghostbusters to be needed.

  1. No believers

Winston and Stan "play" Ghostbusters on kids' parties, with moderate success (they were hoping for He-Man instead):

BOY: My dad says you're full of crap.

STANTZ (stopped cold): Well, a lot of people have trouble believing in the paranormal.

BOY: No, he just says you're full of crap and that's why you went out of business.

And to Venkman, who wanted to speak to the mayor

HARDEMEYER (bristling): Look, you stay away from the mayor. Next fall, barring a disaster, he's going to be elected governor of this state and the last thing we need is for him to be associated with two-bit frauds and publicity hounds like you and your friends. You read me?

If the public, the voters, believed the Ghostbusters, the mayor would rather want their support. Instead, he wants to have nothing to do with them.

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