Money Games

Chapter 9Daewoo Crisis

The FSC was clearly stalling us, and we didn't know why. We attributed it to a change of heart on their side, or the loss of political will. All of our internal discussions were focused on finding ways to push the government forward on our deal. Had we known what was really behind the delay, we might have taken a different tack.

The crisis at Daewoo, it turned out, was starting to look worse than the FSC had feared. But until it knew just how bad it was, it did not want to finalize the deal for Korea First Bank. KFB was the chaebol's main creditor, and there was no way to gauge the delinquency level of its loan book without resolving the Daewoo scandal first. Chairman Lee, I discovered much later, was intent on stalling until the Daewoo exposure was fully revealed.

In addition, the chairman had made a personal request to Seung-won Han, the chairman of the Board of Audit and Inspection of Korea, to conduct a full audit of the FSC's restructuring efforts. “It was probably the first time that the head of a government body had requested to be audited,” he recalled later in his memoirs. But

the crisis called for special measures. The decisions that we made now under crisis conditions should not be evaluated later under a new post-recovery set of standards. History can be unkind once the market recovers, so I wanted a fair evaluation before it was too late and stale.

Had I known this at the time, I would have found Chairman Lee's attitude understandable and, ...