Stop Squandering Public FundsStockholders are vehemently protesting against the government''s decision to scrap exiting shares of six banks ?Hanvit, Seoul, Peace, Kwangju, Cheju, and Kyongnam Banks --on the eve of infusing additional public funds of 7 trillion won ($5.8 billion).
Their protests are expected because their stocks will decline in value. The government has put forth the justification that stockholders should be held accountable for a complete reduction of capitalization, but it is regretful that many small stockholders who have had nothing to do with unhealthy management of the banks will be dealt a big loss. Others losers include bank employees who invested in the hope of bolstering their own banks, the citizens who actively supported the banks in their regions, and the well-meaning investors who swallowed the former finance and economy minister''s words that there would be no more capital reduction.
Nevertheless, we believe that the government has opted for a policy in keeping with its principles. In a situation where the value of banks'' assets have fallen to negative numbers and profits cannot be expected, if the additional public funds are poured in without the complete reduction of capitalization, it would only benefit the ailing banks'' stockholders on the collateral of taxpayers'' money.
The idea of a partial exemption might be entertained for well-meaning investors, but winnowing them out would be a difficult process and also it does not fit the principle that all shareholders should shoulder losses together. With the reduction of capitalization to zero, the government will lose all the public funds it has so far injected － $8.3 trillion won in total. The government must explain this fact to investors to get them to understand.
Our support to the principles notwithstanding, we believe that the government should be held accountable for all previously injected public funds. Otherwise, the additional fund of 7 trillion won is liable to disappear like snow in the spring sun. In fact, many people have pointed out time and again that the government, the Korea Deposit Insurance Corporation, and managers of ailing banks are recklessly wasting taxpayers'' money.
Not to mention the scale and the timing of infusing public funds, many people criticized the lack of supervisory mechanisms and bank managers'' loose moral disciplines. So long as these numerous problems are not addressed, it is obvious that the additionally formulated public funds of 40 trillion won will go down the drain as quickly. Therefore, at this juncture the government and the banks must be held responsible for squandering 8.3 trillion won.
Not to mention the former finance ministers and Financial Supervisory Service chairmen, the current ministers and vice ministers cannot be free from the accusation that they have shirked their responsibilities through lax management practices. It was a former finance and economy minister who confidently said, "There will be no additional reduction of capitalization," but the general public looks up to the government, not a particular minister, for guidance and assurance. High-ranking bureaucrats and ailing bank presidents and executives who have been involved in managing taxpayers'' money cannot escape blame either.
Only when those who are responsible for the current state of affairs are identified and held accountable, can taxpayers and well-meaning investors be persuaded to put their trust back in the financial sector and the government.