How to Fill in the Public FinanceContrary to the government's official statements, the money raised to bail out the financial industry in the wake of the IMF crisis has been completely exhausted.
Finance and Economy Minister Lee Hun-jae, along with Financial Supervisory Commission (FSC) Chairman Lee Yong-keun have repeatedly emphasized that bailout funds would not be replenished by drawing from the government budget, but through the recovery of funds from previous bailouts of financial institutions. However, the money recovered to date has been very small and, moverover, the money recovered was diverted to other areas and not spent to revitalize the financial sector. Therefore, the recovered money cannot be spent on the impending bailout of Investment Trust Companies. Therefore, we question the government's honesty when it comes to reporting the size and scope of the funds needed for the second round of financial restructuring.
As we have repeatedly stated, we agree that additional public funds are required to complete the restructuring of the financial industry, to stabilize the financial markets and recover the Korean economy, we believe that Investment Trust companies, as well as banks, should be revitalized using public funds.
However, we can not but be disappointed with the frequent obfuscations made by economic policy makers as well as their opaque and unreasonable policies. During a public briefing held at the National Assembly's opening last year, economic policy makers confirmed that $58 billion was enough for the completion of the restructuring program. They even expressed confidence that andditional preparation of public funds would be unnecessary. However, as soon as the election was over, senior presidential secretary for economic affairs Lee Ki-ho changed his tune and stated that an additional $35 billion would be required.
The method of fund raising has also been a critical problem. FSC chairman Lee said that around $9 billion in funds is currently available, however, more than $1 billion of that must be spent to cover the debts of Nara Merchant Bank. Moreover, an additional $6 billion is earmarked to pay-off of insolvent securities. Therefore, if the government injects $6 billion in support of Daehan and Hankook Investment Trusts, as is scheduled,the government will be forced to rely on other financial sources. The government stated that it would issue treasury bonds after securing loans from banks. However,the treasury bonds pay a high rate of interest and are not easy to sell.
Therefore, we do not understand how economic policy makers will be able to raise $7 billion without the cooperation of the National Assembly. The economic policy makers have insisted that they need not get the agreement of the the National Assembly. We believe that the government is only trying to evade criticism from the National Assembly and the public and that the government is responsibile for the mismanagement of the bailout.
Therefore, we urge that the government seek the approval of the National Assembly before requesting additional public funds to support the financial sector. Most of all, the financial operation of the more than $7 billion of funds left should be inspected, in order to find any problems in its management. The government should tell the truth and ask for a national consensus. The owners of financial institutions and enterprises, who exercised unsound financial management, as well as inefficient governmental officials should take responsibility for their actions. After all, the people must shoulder the burden of paying for the additional funds. Therefore the National Assembly, an institution representing the people, must participate in the preparation of additional public finance.
by Shin Yae-lee