[EDITORIALS]Rescuing investment firmsThe latent financial problems of Korea Investment and Securities Co. and Daehan Investment and Securities Co. have surfaced. The government is worried that the collapse of the two companies could cause serious market distortions and side effects. In order to prevent such a development, it has decided to normalize their operations by providing public funds and then privatizing them.
Since the two firms suffer from enormous deficits and insolvencies, they cannot sustain themselves on their own. Depositors’ confidence began to diminish as the insolvencies grew bigger, and they ultimately turned away from the securities market. For this reason, corporations lack funds which they used to get from the securities market. The two also played a role in bringing discredit to Korea in the international financial market.
There is no hope that the share prices of the two firms will surge and their management will be nomalized. There are no buyers for their shares. Shutting the firms down would not only bring enormous financial loss, but would also have a negative impact on other firms. In view of such difficulties, it seems that providing public funds, normalizing management and selling the firms to private buyers is an inevitable alternative.
But there should be a few preconditions that should be met before public funds are provided. The most urgent is restructuring. The government has already provided them with 5.8 trillion won ($4.9 billion) in public money, but they failed to fulfill the terms of the agreement. Inspection of the firms’ management and the necessity for further restructuring is apparent. An analysis of whether to keep the firms separate or merge them should be made.
Whether additional financing of 3 trillion won is the appropriate amount should also be determined. Management of the funds should be strengthened. The executives and staff of institutions that are assisted by public funds should not be paid generous wages and allowed to spend taxpayers’ money at random. Politicians must open their eyes wide and keep careful watch in the name of the legislature.