EDITORIAL from the Korea Times on March 19)

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Save Every Penny
Government Should Keep Tight Watch on Public Funds

There is one silver lining in the current economic cloud; it's mostly a case of
``been there, done that'' for Korea. Watching the government and business
community cope with the ongoing crisis, however, one can't help but wonder
whether they've learned anything from the experiences of the 1997-98 financial
crisis.

Seoul is about to create a maximum 80-trillion won ($57-billion) fund to purchase
bad debts from banks, replenish their capital base and restructure ailing
companies, almost half the amount it spent for similar purposes 11 years ago.
Unlike the first financial crisis, however, there is a worrisome lack of
supervision on the use and whereabouts of these public funds. Back then, the
government installed triple locking devices by setting up the public fund
management committee, having the panel undergo periodic checks by the Board of
Audit and Inspection and report its performances to the National Assembly
regularly, none of which the government is now doing.
On the contrary, Chin Dong-soo, chairman of the Financial Services Commission, is
just busy encouraging domestic banks to draw from the funds, assuring them there
will be no strings attached to the taxpayers' money, which means regulators will
not intervene in the management of banks that receive public funds. FSC officials
say their foremost priority is to prevent a liquidity crunch in the markets by
helping banks fulfill their proper role as lenders.
Nobody wants to see paralysis in the financial markets, but the regulatory
authorities' attitude defies the understanding of ordinary citizens.
These banks, both now and a decade ago, are finding themselves in ``financial
distress due to recklessness and greed,'' if we borrow from the terms U.S.
President Barack Obama used in describing the irresponsible and morally
unpardonable behavior of insurance giant AIG.
Nor have Korean banks cared much about risks, as they have been bent on just
maximizing profits by competing to make mortgage-backed loans and selling
everything that can make money at high commissions to grow bigger than their
domestic rivals. As situations at home and abroad aggravate, they are even
calling on the government to make payment guarantees and the central bank to
directly purchase bank debentures.
As such, the government should have urged commercial banks to stand on their own
or at least make sufficient self-help efforts by, for instance, disposing of
overseas assets, cutting down on dividends and slashing pay for executives and
employees.
President Lee Myung-bak was right when he asked how these banks could ask for
taxpayers' money while maintaining their currently high salary system, which is
nearly double the level of other industries. The regulators unduly low-keyed
approach to public fund management may demonstrate that these officials are
``accomplices'' in making and administering wrong policies, including lax
supervision. To prove otherwise, they should revive the public fund management
committee without delay.
Taxpayers have every right to know who uses their money and how. The National
Assembly, instead of being mired in partisan dogfights in the run-up to more
by-elections, ought to hurry to set up a panel exclusively responsible for
watching the flow of public funds.
As President Obama said, all this is vital to ensure everyone, from ordinary wage
earners to executives of mismanaged banks, ``play by the same rules.''
(END)