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To: Angela who wrote (2730)	1/6/1998 2:16:00 AM
From: pat mudge	Respond to of 6180

[Korea and U.S. bankers] Angela -- I don't know who comprises the chaebol, but, like you, I'm curious. I'll try to watch for comments as I read other sources. From the Economist article, it appears Kim is the right man for the job, at least in that he seems positioned to take on the chaebol and support the IMF in following their guidelines. Of course, it's early in the game. From this evening's late-breaking news, a report on the bankers' meeting in NY today: <<< Reuters Story - January 05, 1998 19:32 By George Lerner NEW YORK, Jan. 5 (Reuters) - South Korean officials and U.S. bankers took a small step toward solving the Asian nation's financial crisis Monday, holding their first face-to-face meeting on refinancing $40 billion in short-term debt. "It was a meeting of minds as to where the government is going," one banker who attended Monday's gathering said. "The Koreans are looking for ideas." While no agreements were reached, South Korean presidential adviser In Yong Chung called the meeting "positive" and said he and the bankers discussed several options. Chung, who met with U.S. Deputy Treasury Secretary Lawrence Summers Monday evening, said his country had been presented a "menu of options" to restructure its obligations. But he added that Seoul needed time to study the various alternatives. Analysts and banking sources said they did not expect South Korea to decide on a refinancing plan until after President-elect Kim Dae-jung takes office Feb. 15. Sources said Monday's talks, which took place at J.P. Morgan headquarters, were general, not specific. U.S. bankers, many of whom participated in Latin America's debt refinancing in the 1980s, said the first day of talks gave them a better grasp of Korea's problem. Korean delegates said their government would need more time to select a rescue plan. One banker familiar with the talks said he expects Korea ultimately to refinance its short-term debt with a plan similar to a J.P. Morgan proposal currently on the table. That plan would involve the Korean government issuing as much as $20 billion in debt, half of which would be go toward short-term debt of its ailing banks. "It was the very first time the lender side and the Korean side have met face to face," Chung said. "It's too early to say (which plan the government will choose)." Korea is looking for ways to rebuild confidence in its battered economy, where a string of corporate and banking failures set off a run on the country's currency and stock market, and raised questions about how troubled companies could refinance themselves. "The details cannot be worked out in one meeting," said E. Han Kim, finance professor at University of Michigan, who also attended the talks. "This is not an insolvency situation, this is a liquidity situation." U.S. bankers, who came together late last month at the behest of the Federal Reserve Bank of New York, fashioned an accord to roll over the country's debt due at the end of last year, but were still working out the details of a massive debt restructuring. "What has had to be addressed urgently is maintaining the lifeblood of the economy -- the short-terms, credit lines, the trade lines (of credit) -- and that's being addressed," said a banker who participated in Monday's session. The meeting did not tackle ways of extending Korea's stockpile of short-term debt. Participants left the problem for later talks. "It's going to be under discussion as we move to meetings later in the week," one banker said. U.S. banks have been weighing the J.P. Morgan plan, which would involve up to $20 billion debt in new Korean debt, as well as an earlier proposal for a $9 billion global bond issue from Goldman Sachs and Salomon Smith Barney, advisers to the Korean government. "My sense is that we'll end up with something more like the Morgan plan," said one banker familiar with the talks. Japanese media reported that 10 major Japanese banks agreed Monday to roll over South Korea's debts coming due in January to help ease South Korea's acute shortage of foreign currency. Before Monday's meeting, European and U.S. banks had agreed to extend for one month Korean debt that matured at the end of December. The extension enabled global banks to give the financial community time to figure out the details of its obligations to Korea and to prevent global banks from upsetting their balance sheets at year-end, according to a source close to the Federal Reserve.>>>

To: Angela who wrote (2730)	1/7/1998 3:02:00 AM
From: pat mudge	Read Replies (1) \| Respond to of 6180

[Crony Capitalism and the East] Bouncing off the discussion on Korea's chaebol, today's Internet Week newsletter reflects on the damage done by Crony Capitalism : <<< Plugging In: Open Information Is The Only Cure For Crony Capitalism An ill wind is blowing from the East. As we look back on the lessons of the past year, it behooves us to consider the implications of the great Asian currency collapse of 1997 on both our industry and our economy. The Asian "miracle" is over. The government-centric economic model brought to a pinnacle of development by Japan and emulated by Korea, Malaysia and the other Asian Tigers is in shambles. The time has come for "crony capitalism"-a mix of free-market practices, central economic planning and systematic corruption-to join socialism on the trash heap of history. The roots of crony capitalism run deep. Alexander Hamilton, first Secretary of the Treasury under George Washington, was a tireless promoter of government-industry cooperation supported by carefully orchestrated corruption. He believed that enriching society's leading citizens through state- sponsored financial dealing was a key strength of the British Empire, and recommended this practice in place of a hereditary aristocracy to help the young United States counterbalance the excesses of popular democracy. This philosophy found fertile soil in post-war Japan. A similar approach later helped the Asian Tigers emerge from poverty. For decades, crony capitalism delivered startling economic growth while ensuring political stability as nations edged toward democracy. But ever since the Japanese bubble economy burst in the early '90s, presaging the broader Asian currency debacle, the bankruptcy of this approach has been revealed. Transparent economies in which the inner workings of government, corporate and financial institutions are publicly disclosed are difficult to corrupt-if for no other reason than rival factions force checks and balances. This is why crony capitalists work so hard to deny outsiders entry into financial markets. With the advent of global networking, the instant dissemination of financial news and the ability of currency traders to shift massive amounts of capital at the speed of light, the secret circle of control has been broken. And not a moment too soon. It is not just hidden wealth transfers that make crony capitalism evil. The more serious problem is that without transparency, failure is too easy to hide. In a transparent economy, dismal economic performance- whether it be bad loans, bad management policies or outright fraud-is quickly exposed to the discipline of the market, which can force corrective action. Under crony capitalism, failure is rarely acknowledged, so it cannot be corrected. As failures accumulate, liabilities balloon that ultimately threaten healthy institutions entangled through cross-ownership. Capitalism's "creative destruction" works best when administered in small doses. Unleash it in a tidal wave and it can wash away entire national economies. Americans have been criticized for relying too heavily on instant information, creating financial markets in which a company's stock can react sharply to yesterday's cash register receipts. Yet this so-called short-term focus has proven far more effective than cadres of government-industry "experts" working behind closed doors. Asia must take its medicine, with or without sugarcoating, by an International Monetary Fund bailout of the venal and inept. Demanding fiscal austerity in return is not enough. Only insistence on full financial disclosure can effect a cure, without which the cycle is doomed to be repeated. Anything less risks the prosperity of the world. Bill Frezza is a general partner at Adams Capital Management. The opinions expressed here are his own. He can be reached at frezza@alum.MIT.EDU or techweb.cmp.com/nc/frezza/frezza.html.>>>>