The National Assembly opened a month-long extraordinary session Wednesday to discuss major state affairs, review the government’s policies and deliberate on the pending bills. But this session is likely to be dominated by one burning issue ― the savings bank scandal.
The floor leaders of the ruling Grand National Party and the main opposition Democratic Party have agreed to start a parliamentary investigation into the seven suspended savings banks on June 23. The probe is necessary for lawmakers to get a handle on the causes of the problems and come up with cures to them.
But the parliamentary process is likely to go off the rails as the two parties appear to be more engrossed in playing the blame game than in finding solutions to the problems or protecting innocent depositors of the insolvent banks.
The parties view the savings bank debacle as a political issue that would affect the outcomes of the high-stakes general and presidential elections slated for next year. Hence they are all out to spin it to their advantage and lay the blame squarely at the door of the rival party.
The DP defines the scandal as a corruption case involving close aides to President Lee Myung-bak. Prosecutors’ arrest of Eun Jin-soo, a former commissioner of the Board of Audit and Inspection, gave credence to this framing. One of Lee’s key aides, Eun was charged with abusing his power to soften the watchdog’s audit of Busan Savings Bank.
Rep. Park Jie-won, former DP floor leader, sought to strengthen the party’s narrative by raising suspicions that more presidential aides, including Chung Jin-suk, senior presidential secretary for political affairs, might have been involved in lobbying for insolvent savings banks.
The DP’s attempt to put the blame on the incumbent government triggered counterattacks from the ruling camp. The presidential office disclosed that a DP official, acting on behalf of Rep. Park, sought its help to rescue Bohae Savings Bank. This suggested that the lawmaker might have been involved in lobbying for the distressed bank.
The ruling GNP also claimed that more than 95 percent of the responsibility for the current problems in the savings bank sector lay with the governments of Presidents Kim Dae-jung and Roh Moo-hyun because they implemented misguided policies.
In our view, both sides should be held accountable for the current mess. The incumbent government cannot avoid responsibility because it just let the problems go from bad to worse. Although it was aware of how serious the trouble was as early as in 2008, it failed to take action promptly.
The two previous liberal governments cannot escape responsibility either because the savings bank fiasco is the result of not just a regulatory failure but a policy failure. The seed of misfortune was sown when the Kim Dae-jung government allowed small community thrift institutions to use the term “bank” in their names and raised the amount of deposits protected by deposit insurance from 20 million won to 50 million won, the same level as that for commercial banks.
These measures boosted assets of these institutions. Then the Roh government allowed them to extend project financing loans, a risky business for savings banks given their poor risk management skills. The next thing we knew, many banks got into trouble by recklessly exposing themselves to risky property development projects.
In conducting the parliamentary probe, lawmakers should avoid futile political wrangling and focus on how to clean up the mess, transform savings banks into viable financial institutions, and reform the corruption-ridden financial regulatory agencies.
They should also remember that the savings bank problem is not the only issue that needs to be dealt with during the ongoing parliamentary session. A long list of important bills, including the one on North Korean human rights, are awaiting their attention. They should make the Assembly session productive.
