[Editorial] Who Is Responsible for Public Funds?

While the Financial Supervisory Service (FSS) and Ministry of Finance and Economy (MFE) make decisions for important policies Korea Deposit Insurance Corporation (KDIC) and Korea Asset Management Corporation (KAMC) manage the public funds,. It is said that the amount of public fund investment is often decided by the higher power than the FSS and the MFE, and that the political pressure is quite strong.

Although the Board of Inspection and Audit (BIA) accomplished a lot through a wide-range of inspection on 150 trillion won worth of public funds, the investigation on the cause and the responsibility for the wrong policy has not been done properly. The KDIC and the KAMC can make mistakes while managing the public funds for the first time, and the loss caused by moral hazard of these institutes is only the tip of the iceberg. However, harms caused by policy, which was made even though authorities knew it was wrong policy, are much greater.

A representative example of the wrong policy-making is that the government created the loss by resuming business of the Daehan Banking Corporation and the Nara Banking Corporation. The two banking corporations were approved to resume the business, but closed down after one or two years later with the increased amount of insolvency, thus, increasing the amount of public funds to 2.3 billion won.

Although the FSS made the final decision to revive the ailing banking corporations, of which influence on the national economy is insignificant, suspicion of the political circle are aroused as an influence behind such an unreasonable decision. Therefore, it is often said that the political finance is worse than the government-administrated finance. There must have been something else involved in order to include the deposit of the Trust Cooperation Union into the deposit protection list. The government-administrated finance and the political finance have maneuvered the large-scale insolvency such as Daewoo Group, which eats up the public funds.

The concealment of more than 7 trillion won of assets by 5,200 owners of the nonviable companies, which inflicted a great loss to banks, was possible because banks or the KDIC could not trace the accounts. It should be able to trace the accounts of the owners, who hide assets while not paying the bank loans, by legislating a special law.

Although the government said that it was not necessary to create additional public funds at this moment, it is hard to believe. The government asserted that it did not need the public funds any more during the time of Minister of Finance and Economy Lee Hun-Jae. However, when the public funds were necessary, the government changed the minister and created the funds.

There should be no more public funds any more. If the government prevents the misuse of the public funds, and raises the recovery rate, the funds can be appropriated through the reinvestment despite the emergent case. To withdraw the nonviable financial institutions is to save the public funds and to strengthen the financial industry.