FSC chief and Park at odds over house poor

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FSC chief and Park at odds over house poor


It seems as though President-elect Park Geun-hye is not on the same page as the country’s financial chief when it comes to household debt, a growing concern that is threatening the country’s economic growth along with falling property values amid a slumping market.

While Park showed her strong will to resolve the soaring household debt problem by injecting more government funds, Financial Services Commission (FSC) Chairman Kim Seok-dong, known as one of inner-circle members of incumbent President Lee Myung-bak, considers the country’s household debt level to be manageable. Lee has already expressed his opposition to use government money to ease homeowners’ burdens.

“It is too early to inject government funds to solve the problem, and it would not even be appropriate to do so,” Kim said at a year-end meeting. “The government should be very careful about adopting reckless measures to help the indebted.”

Park pledged to raise public funds of 18 trillion won ($16.95 billion) to write off debt for heavily-indebted people and help the so-called “house-poor” by introducing a “stake-sale” system. This refers to people who are effectively living beyond their means because they are forced to spend such a large share of their income on mortgage payments, property taxes and other home-ownership costs, leaving them with barely enough discretionary income to get by. The situation is compounded by Korea’s long-stagnant property market.

The stake-sale system aims to let public institutions purchase stakes in their homes, helping reduce the interest payments on their mortgages.

Household debt reached a record 937.5 trillion won at the end of September.

The Financial Supervisory Service supported Park’s household debt plans. “We’re willing to implement the public fund envisioned by [Park] as part of a series of measures to facilitate a soft-landing in household debt,” said its governor, Kwon Hyeok-se. But experts say the plan will strain government coffers.

Park pledged to extend a reduced acquisition tax that was implemented in September but which expired on Monday, but the bill has not yet been passed by the National Assembly.

By Song Su-hyun [ssh@joongang.co.kr]
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