Bankers win, Americans and Koreans lose in IMF bailout

For those of you who spent the holidays sweating whether Citibank and Chase-Manhattan were going to take a bath in the Asian crisis, relax. These boys are going to do just fine. The vulture capitalists will be feeding on Korea's carcass a long, long time.

The crucial date was Christmas Eve, when Treasury Secretary Robert Rubin somersaulted and approved $10 billion in emergency aid. Purpose: Give Seoul fast cash to enable its banks to pay off howling creditors, i.e., Japanese, European and U.S. banks.

Step 2 came December 27, when U.S. banks announced they would roll over their loans to Korean banks. Sounds magnanimous, until you read the fine print. The loans are to be rolled over in return for Korean govemment guarantees of the new loans and interest rates up to six percentage points higher than the old rates. This used to be called loan-sharking. Unsurprisingly, U.S. bank stocks quickly sparked a year-end rally on the Dow.

By way of analogy, assume you were fired and could not meet the payments on a $100,000 mortgage. When you went to the bank to beg for an extension, your banker said: OK, we will extend your mortgage from 10 to 30 years, but your 6% interest rate is going up to 10%, and there will be a fat fee for the rollover.

Would you consider that banker a buddy or a bloodsucker? This is but the beginning. Led by J.P Morgan, U.S. banks are angling to have South Korea issue $20 billion in bonds and to give these bonds to U.S. bankers in a swap for South Korean bank debt. Idea: Exchange rotten debt for good debt, backed by a government backed by the IMF, which is backed by U.S. taxpayers. Who might underwrite the new bond issue? One report suggests that Goldman, Sachs has the inside track.

And there's more to come. Seoul is using bailout money to buy Korea First and Seoul Bank to wipe their books clean of bad loans and to sell the pair. Leading prospective buyers? According to Korea's media, they are Citibank and ChaseManhattan.

As Korea's plunging currency and stock prices kill its economy, 45 companies a day go belly up. But to some, that is not bad news. "Korean companies are looking ripe to foreign buyers: Selling spree expected," ran the December 27 headline in the New York Times.

Transnational corporations are poised to swoop in and snap up Korea's properties as in a game of Monopoly. Says Sen. Robert Torricelli (D.-N.J.), "The country is about to see a fire-sale of some of its major assets." And when the U.S. corporations buy up these companies at bankruptcy-sale prices, they will find that Korea's currency collapse means that the dollar wages of Korean workers are now only half what they were in July. Isn't the global economy wonderful?

But even this is not the end. The only way Koreans are going to get the dollars to pay off this Everest of debt is through exports to the United States. When those exports hit American shores, they will take down U.S. factories and force layoffs of U.S. workers. The richest, most mobile of U.S. companies, however, need not worry.

Thanks to GATT, they can shut down their U.S. plants and move production to Asia, where workers now earn half the dollar wages of six months ago. Let us list, then, the probable winners and losers.

Winners:

U.S. banks whose foolish loans will be made good by the IMF bailout, and whose rolled-over loans will yield an even higher rate of interest with more solid guarantees. U.S. banks may even be able to gobble up much of Korea's banking sector at close-out prices.

U.S. transnationals, which can now, like birds of prey, pick off Korea's most priceless assets one by one.

Losers:

South Korea. The nation has been humiliated, its pride broken. Seoul is now in debt-bondage to the IMF, the United States and Japan, and much of what its hard-working people built up over two generations will be sold off to scavengers at foreclosures.

Korea's workers, who have seen savings wiped out and pay cut in half in dollars. They face a deep recession and years of IMF-imposed austerity as punishment for mistakes they never made.

U.S. taxpayers, who will be put at risk for scores of billions of dollars in bailout money, U.S. companies that will be hammered by imports, and U.S. factory workers who will lose high-paying jobs.

Despite repeated blunders, the investor class always seems to win; despite blameless behavior, the working class always seems to lose out. But this is not the end of the story. If Americans in tough times were enraged to see rich Japanese snap up Rockefeller Center, proud but newly impoverished South Korean workers are unlikely to welcome the Yankee capitalists profiting from their misery.

Get ready for an Asian backlash against the IMF-and us.

Copyright Human Events Publishing, Inc. Jan 16, 1998
Provided by ProQuest Information and Learning Company. All rights Reserved