[EDITORIALS]Fix the blame for card crisisThe Board of Audit and Inspection is about to inspect both the Financial Supervisory Commission and the Financial Supervisory Service in connection with the recent insolvencies of credit card companies. Depending on how successful this inspection is, we may learn whether we can reduce the chances of further policy failures. We have high expectations of the inspection.
The seriousness of faltering credit card businesses, a major destabilizing factor in the Korean economy, was made evident with LG Card’s liquidity problems. The economy is burdened with 440 trillion won ($369 billion) in household debt, and two-thirds of the country’s 3.6 million credit defaulters are credit card debtors. This shrinks consumption and delays economic recovery. As there is no immediate solution, the card companies’ insolvencies spread to financial institutions, necessitating government bailouts and causing instability in financial markets.
Responsibility for the insolvencies lies with the cardholders and the companies. But the short-sightedness of economic policymakers also played a major role. In 1999, under Kim Dae-jung, the government lifted the cash service limit and allowed companies to accept card applications on the street. This began with the noble motive of bringing transparency to business transactions, but the government used it to boost housing construction and to spur the economy. Warnings were issued by the experts, but the economic team then in charge disregarded them.
The audit board must trace the execution of this policy and clarify who is responsible for its failures. We do not say this out of a desire for punishment, but because it would be inappropriate to hold no one accountable for a policy failure that shocked the public.
Moreover, we are worried because these mistakes are apparently being repeated. The incumbent economic team has a “leave it alone” attitude toward the problem. If this continues, credit card woes will worsen and the economy will face more serious problems. It must be made clear who is responsible, and how the problems developed.