[EDITORIALS]A bailout fund disasterThe results of the investigation by the prosecution and the Board of Audit and Inspection of the public fund to restructure financial institutions outraged the public.
According to the investigation, the Korea Deposit Insurance Corp. and the Korea Asset Management Corp., which led the program, squandered an astronomical amount of public funds through lax management. They caused losses by discounting debts of insolvent businesses and by neglecting their duties to trace the hidden assets of business executives who received loans from financial institutions and failed to repay them.
It even turns out that the Korea Asset Management Corp. sold 9.9 billion won ($8.5 million) worth of bonds that were issued by an insolvent company but whose payment was guaranteed by the Korean government to a foreign investment company for 100 won. The investigation also showed that financial institutions that depended on the public funds sharply increased their executives’ salaries. In sum, a total of 1.076 trillion won was squandered.
It was even more shocking to see how some owners of insolvent companies behaved. One owner, just prior to bankruptcy, stole tens of billions of won of company money and used the sum to buy a luxurious house. He even paid around 10 billion won to the company’s labor union, which had threatened to publicly disclose the corruption. Other owners used company money to pay alimony after a divorce and for their children’s study abroad.
The public fund program, which was financed by taxes, ran into trouble due to lax management, embezzlement and moral hazards. But what have the inspection and monitoring authorities done so far? We believe the funds would have been well managed if they were private money.
No improvement has been achieved so far, and urgent measures are needed to increase the transparency and effectiveness of the program. What is needed, in particular, is to strictly punish those who caused huge losses because of their lax management practices and negligence.
For the program to play its proper roles, some institutional changes must be made and those who caused the losses should be strictly punished. The National Assembly is also called upon to act.
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