Ill-advised bill on helping victims of troubled savings banks

A special bill on assistance to victims of poorly performing savings banks was passed Thursday by the National Assembly`s National Policy Committee. Under the bill, those who deposited more than 50 million won (44,500 U.S. dollars) in 18 savings banks suspended after September 2008 or those holding subordinated bonds can recover 55 percent of their losses. The law does not protect those whose savings exceeded 50 million won in a bank if the latter went bankrupt. Subordinated bonds have the lowest priority in repayment, so in case of the issuer’s liquidation, subordinated bond holders might not be repaid. Their interest is high but highly risky as well. In this sense, it is hard to accept the claim of subordinated bond holders that they were unaware of the risky nature of the bonds. After all, they turned to savings banks and bought risky bonds because of the lure of high interest rates.

If the special bill passes parliament, the government must pay a combined 102.6 billion won (91 million dollars) to depositors of the troubled savings banks. With the special account for savings banks in the Deposit Insurance Fund in the red, funds accumulated by customers of regular banks and insurers should be mobilized. This means those who have nothing to do with savings banks will suffer losses.

Lawmakers on the policy committee have apparently drawn up the bill to win over victims of savings banks in the run-up to the April 11 parliamentary elections. If victims of similar incidents demand government support by invoking this bill, the government cannot say no. The bill will further spread the belief that whining and griping will get results, and also undermine a financial order by shaking the fundamentals of the Depositor Protection Act. If the bill is signed into law, the government cannot push ahead with the restructuring of other savings banks.

Regrettably, lawmakers from the ruling Saenuri Party have taken the lead in preparing the bill. Reps. Lee Jin-bok and Lee Jong-hyuk separately prepared the bill and Rep. Huh Tae-yeol, who chairs the policy committee, introduced it to parliament. The constituency of the three lawmakers is Busan. The main opposition Democratic United Party, which will field quite a few candidates in Busan, has turned a blind eye to the negative impact of the bill and joined forces with the ruling party to pass it. “Under the judgment that the bill will not pass the parliamentary judiciary committee and the plenary session of the Assembly, we prepared it to assuage Busan residents,” the opposition party said. On this, certain lawmakers said they are ashamed over such an "illogical claim." Lawmakers themselves are insulting legislative power.

In addition to the three lawmakers, fellow ruling party lawmakers Ko Sung-doug, Kwon Taek-ki, Kim Young-sun, Kim Yong-tae, Lee Byum-rae and Lee Sa-chul and Democratic United Party legislators Cho Young-taek, Kang Sung-jong, Shin Kun and Woo Je-chang voted for the bill. Voters are advised to remember their names. The National Assembly should reject the bill and President Lee Myung-bak should veto it should it pass parliament.