Chapter 207: Chapter 1

The head of the Financial Supervisory Commission’s Policy Department 1 left the Sunkapital Building in Yeouido on the morning of March 14, 2003, his face as gloomy as the overcast sky.

While investigating SK Global’s accounting fraud, he had uncovered an issue that could shake the entire financial market.

He scrutinized the funds containing SK Group’s bonds as if under a microscope, finding it odd that the redemption requests were so widespread compared to the fund’s size.

And he discovered that the cause was none other than corporate bonds issued by credit card companies.

These card bonds were short-term funds borrowed by credit card companies to pay merchants on behalf of their customers. Credit cards themselves were a chain of debt.

Since late 2002, the FSC had been watching them with unease due to excessive competition and a rapid increase in the number of people with bad credit.

However, because there were many asset-backed securities, they had judged that no major problems would occur unless there were special variables in extending the maturity of the bonds.

But with the North Korean nuclear issue erupting and overseas short-term borrowing ceasing, the accounting scandal at SK Global sent the already 불안한 financial markets into an uncontrollable crisis.

The size of the card bond market was known to be around 50 trillion won, but the FSC’s investigation revealed it to be over 90 trillion won, and they could no longer stand idly by.

Financial authorities convened a financial policy consultation meeting at the Korea Federation of Banks in Myeong-dong, presided over by the Vice Minister of Economy and Finance.

The emergency meeting stretched through the night, and on March 17th, a comprehensive plan for credit card companies was announced.

The measures aimed to support funding by partially easing regulations on credit card companies, premised on their own intensive efforts to improve their financial structure and profitability.

The problem lay in these intensive self-rescue efforts.

The term ‘self-rescue’ implied pressure to reduce debt even if it meant pouring company money into it.

However, the heads of the chaebol families valued their personal wealth more than their companies. They would use company money and government funds to prevent credit card companies from failing, but no one would liquidate their own assets. It was clear that the situation would worsen.

“What about the short-term bonds?”

“We’re barely covering them with the excess funds from our affiliates, but we won’t last more than a few days.”

“As a temporary measure, we’ve reduced cash advance services and credit card limits. But we’ll have to stop cash advances next month. We’re short on cash.”

Vice-chairman Jin Dong-gi rubbed his forehead. He thought he was sweating, but it was just his imagination.

Having been in charge of heavy industries, he had the ability to sense market changes based on long-term economic trends. However, the situation of having to manage money on a daily basis in a financial company like a credit card company was truly unbearable.

“We need to pull in more funds from our affiliates. Otherwise, we’ll have a big problem next month….”

“No way. I won’t push our healthy affiliates into financial difficulties to bail out those who are using credit cards to stay afloat!”

“But if cash advances are suspended, it’ll be catastrophic.”

“That’s right. If the use of Soonyang Card is suspended, it will negatively impact not only the card company’s stock price but the entire Soonyang Group.”

As the executives voiced their concerns, Vice-chairman Jin Dong-gi stopped rubbing his forehead.

“What are you doing? Is the agenda of today’s meeting to warn me about the risks? Aren’t we gathered here to come up with measures to overcome those risks?”

Short-term foreign debt, card bonds—the names sound fancy, but they’re all just debt. They took on debt, and the time to repay it has come. The only way to settle debt is to pay it back.

The executives were trying to squeeze out money to repay the debt, but they had run out of options, so they had nothing to offer but warnings.

There were ways to put out the fire. Vice-chairman Jin Dong-gi could take out the money he had stashed away here and there. It would be at least several hundred billion won. But no one dared to suggest it.

Vice-chairman Jin Dong-gi looked displeased at the silent executives and said,

“Do-jun… no, what’s the bond situation with Soonyang Life Insurance?”

It was the most concerning issue for him, so he had to address it.

“The 300 billion won repayment is due in two months. We absolutely must extend the maturity. Frankly, repayment is impossible.”

As expected, only the most extreme option remained.

At that moment, an executive’s voice came from the corner of the conference room.

“Vice-chairman, I think it’s time we discussed the self-rescue measures the government mentioned.”

“What?”

“We need to increase the capital of the card company. Unless we guarantee stability, all measures will only be temporary, and we will eventually face the worst-case scenario of suspending card usage.”

The other executives knew this as well, but they were hesitant to say it in a public setting.

Soonyang Card didn’t have any affiliated company shares. Increasing its capital wouldn’t help the group’s control at all. It would be better to increase the capital of Soonyang Heavy Industries to further solidify Vice-chairman Jin Dong-gi’s control than to increase the capital of such a company.

And Jin Dong-gi wanted, and expected, the answer to be lending funds from Heavy Industries to the card company to put out the immediate fire.

But the clueless executive pressed for the vice-chairman’s answer.

“The Soonyang Group name carries a lot of trust. There shouldn’t be much difficulty in expanding Soonyang Card’s capital.”

“Hey, let’s talk about that later….”

An executive sitting next to him gestured with his eyes, trying to stop him, but it was too late.

“Really? How much do we need? Tell me your thoughts.”

“400 billion won.”

“Will that be enough?”

“Yes. It will not only put out the immediate fire but also allow for stable fund management. A fourfold capital increase is definitely possible….”

“Issue shares with a face value of 5,000 won at 20,000 won?”

“I believe it’s possible because it’s Soonyang Group. With 100 billion won in capital and 300 billion won in capital surplus, a total of 400 billion won, we can overcome this crisis.”

The executives couldn’t hide their tense expressions, but they felt relieved that the opinion they wanted to voice was finally on the conference room table.

“But Vice-chairman, we absolutely must extend the 800 billion won bond for Soonyang Life Insurance. Even if we receive more than 400 billion won, there’s no way to stop Soonyang Life Insurance’s bond repayment.”

A clueless person remains clueless to the end. If he had read Vice-chairman Jin Dong-gi’s expression even a little, he wouldn’t have said that last part.

“Well, we’ve turned everything upside down, so it seems there’s nothing more to say…. Shall we end the meeting?”

Vice-chairman Jin Dong-gi left the conference room without looking back. As everyone awkwardly remained in the conference room, his voice echoed inside.

“The president of the card company, I want to see you.”

The president of Soonyang Card dashed out of the conference room like a sprinter. He barely caught up to Jin Dong-gi, who was striding away, when he heard a chilling voice.

“I don’t want to see that bastard from tomorrow. And I’ll see what I can do about the Soonyang Life Insurance bonds, so you take care of the rest.”

He knew who ‘that bastard’ was without needing a name.

With a capital increase of 100 billion won, his shareholding would fall below 30%, and control of Soonyang Card would be lost.

The owners of chaebol families would rather abandon their companies than lose management control.

Aren’t they the kind of people who would never accept becoming mere caretakers?

“Yes, Vice-chairman.”

The president of Soonyang Card knew his days were numbered. It might even be the first time the Soonyang Group would face bankruptcy.

He bit his lip without realizing it, anticipating a dishonorable dismissal.

* * *

“Everyone, get rich!’ or ‘Father said, enjoy life!’ Now you all know how absurd those advertisements were, right?”

“Even if we know, we forget. If we remembered everything, would con artists like them still be in Korea?”

Oh Se-hyun gave a cynical smile.

“Now, tell me honestly. Did you foresee this kind of situation?”

It wasn’t a premonition; it was something I witnessed with my own eyes. But my answer was different.

“It’s a business where debt keeps increasing. It wasn’t to this extent, but I just thought it would be difficult to run the company.”

“Either way, the bomb in our arms is gone thanks to that. It’s a stroke of luck.”

“I plan to bring that bomb back once it’s gone.”

“Do you think it’ll be okay?”

“A credit card company is no different from a bank that lends money first and collects interest. If they were careful with issuing cards and setting limits, wouldn’t it be a sure-win business?”

Banks thoroughly investigate customers who want loans and secure collateral before lending money.

Credit card companies don’t need to do the same as banks because most loans are for a month and are small amounts. If they carefully check the customer’s creditworthiness and income when issuing the card, the risk of loss decreases dramatically.

Why would anyone refuse such a profitable business?

“Retaking Soonyang Card won’t be easy, you know?”

“There’s no need to rush, but I need to buy up shares as the stock price falls. And I’m a major creditor, aren’t I? There are many ways.”

Retaking the card company alone is easy. The difficult part is achieving two goals at once.

Vice-chairman Jin Dong-gi will have to plead with his older brother, Vice-chairman Jin Young-gi.

To do that, I need to do something drastic… it’s not difficult.

And that day came soon after. That’s how hot the sparks falling on the card company were.

“Uncle, that’s difficult. I’m in a tight spot myself.”

“What?”

Vice-chairman Jin Dong-gi’s eyes widened as he began to glare at me.

“The credit card crisis has dried up our funding. Life Insurance, Fire Insurance… everyone is in an uproar. I’m even looking into short-term borrowing, it’s that serious. Wouldn’t you know it, I even had to borrow money from Father’s hospital?”

Cash loans, which were only 48 trillion won in ’99, soared to 268 trillion won by the end of last year. As soon as credit card companies lowered credit limits, three million people became credit delinquents.

The Korean economy was already suffering from arteriosclerosis. There weren’t many companies left that could confidently say there were no problems.

“The monthly insurance premiums we receive are about to be cut in half. If you don’t settle those bonds, Uncle, we’ll be in big trouble too.”

I made an unusual show of distress and tossed a thick stack of documents.

“Take a look. Because our funding plan has collapsed, all our affiliates are frozen. As you know, we’re entirely in the money business, aren’t we? As the head of Heavy Industries, your finances should be better than ours, right?”

“Don’t even mention it. We’re scraping together every last bit of hidden cash from other affiliates and throwing it into the card company. We’ll be wiped out at this rate.”

My uncle’s exaggerated cries were something else. Or was it not an exaggeration?

“Anyway, let’s wait and see a little longer. The government might provide financial support….”

“No, there won’t be any government support. This happened right after the new government took office. And it’s the price of splurging by swiping credit cards. They don’t have the guts to push it through while ignoring public opinion criticizing the moral hazard.”

Wow, he’s sharp.

If he puts off the bond maturity until the very end, I can really stab him in the back, but he’s showing caution by preparing in advance.

“Then are you just going to stand by? If you don’t settle our bonds, Uncle, I won’t survive. I even overlooked the fact that you haven’t properly taken care of the bond interest all this time. This is the limit.”

Jin Dong-gi couldn’t hide his troubled expression. Seeing that, I spoke with a sly smile.

“How about borrowing some money from outside?”

“Do-jun, if there was somewhere to borrow money, would I be pleading with you, my nephew? The banks are also staggering because of the credit card situation.”

“No matter how tough things get, it’s said that wealth lasts for three generations. Surely there’s a place that would easily lend a few hundred billion won, isn’t there?”

Suddenly, Jin Dong-gi’s eyes gleamed.

“Where? Is there a place with that much capital? You’re not talking about the private moneylenders in Myeong-dong, are you?”

“Going to Myeong-dong means we’ve reached the end of the line. Not there…. Isn’t your older brother there?”

I raised my finger and gestured slightly upwards.

“Big? Hyung-nim!?”

Jin Dong-gi immediately frowned.