November 5, 1997.
As Paul Townsend's remarks in Japan were reported and the detailed terms of the agreement with the IMF were revealed through the media, a public backlash erupted, accusing the government of submissively accepting one-sided demands.
[Financial Markets Thrown Open—Even the Living Room Given Away]
[Criticism Mounts Over Weak-Kneed Negotiations]
[Wave of Suicides Driven by Bankruptcies and Unemployment]
[Civic Group Urges Renegotiation with IMF in Street Rally]
[Civic Coalition: "IMF Deal Seriously Threatens Korea's National Interest"]
[Business Community Expresses Concern Over Unilaterally Unfavorable IMF Terms]
As negative public sentiment grew, even the political world—originally committed to honoring the agreement—began shifting its stance.
[Opposition Parties Vow to Renegotiate with IMF if Elected]
[Opposition Demands Dismissal of Deputy PM Choi Jin-woo and Blue House Economic Chief]
[Growing Calls to Hold Government Accountable for Economic Failure!]
[Ruling and Opposition Candidates in Rare Unity: Demand Investigation into Currency Crisis and Accountability of Economic Team!]
[Presidential Candidates Oppose Labor Dispatch System Set for Early Next Year Under IMF Agreement!]
[Criticism in Political Circles: IMF Bailout is Undermining Korea's Sovereignty!]
Standing with his arms crossed, Choi Ho-geun gazed grimly down at the newspapers spread across the conference table.
Though the newspapers came from different outlets, they all featured front-page headlines blasting the IMF deal and echoing calls by both ruling and opposition presidential candidates for renegotiation.
"Sir, here's your coffee."
Jung Hwan-yeop, wearing a burgundy tie, walked up beside him and handed him a paper cup.
Choi Ho-geun turned his head, accepted the cup, and muttered curtly:
"You actually brought me coffee? What's the occasion?"
"Whoa, why so prickly? Did you have a fight with your wife or something?"
"Tch. You're getting cheeky."
Grinning mischievously, Jung quickly dodged Choi's glare and shifted the conversation.
"Ahem… But seriously, even the ruling Gongjeong Party's candidate is now saying the agreement needs to be renegotiated. The government must be in a really tight spot."
Choi let out a bitter smile.
"Isn't it obvious? The terms of the IMF agreement have become such a hot topic during the election, and now everyone's talking tough just to grab a few more votes—without thinking about the consequences."
"I heard all the presidential candidates had already signed letters of consent before the deal was finalized at the IMF's request. Could this lead to a bigger problem?"
Choi frowned as he brought the paper cup to his lips.
"Who knows? But one thing's certain—this might boost approval ratings, but it's not going to help us recover from the currency crisis."
"You've got a point."
Jung Hwan-yeop nodded in agreement.
As Choi Ho-geun sipped his coffee, his eyes scanned the front-page articles, and he couldn't help but be quietly impressed.
No matter how many times he thought about it, it was uncanny how things were unfolding exactly as president had predicted two days ago.
"He really is something else…"
"Sorry? What did you say?"
"Oh, nothing."
Just then, the phone rang, and Yoo Seok-hyeon, seated at his desk, picked up the receiver.
"Yes, this is Yoo Seok-hyeon, Fund Management Department at Daheung Venture Capital."
He held the receiver between his neck and shoulder while typing on his keyboard, but suddenly froze, eyes wide with surprise.
"Are you serious? Ah… yes, understood."
His suddenly raised voice made everyone in the office look in his direction.
As soon as he hung up, Choi Ho-geun, standing beside Jung Hwan-yeop, asked with a serious tone:
"What happened?"
Still unaware of all the eyes on him, Yoo responded urgently with a grim face.
"S-Silla Securities just defaulted."
"What?!"
The shocking news sent a wave of commotion through the office.
"Are you sure?"
Choi Ho-geun's face hardened as he asked, and Yoo replied immediately:
"Yes. They failed to cover 175 billion won worth of promissory notes that were returned by the bank, so the Korea Financial Telecommunications & Clearings Institute issued a first-stage default notice."
"Hmm…"
Although it wasn't yet an official final default, the amount they failed to cover was so large that Choi let out a sigh and furrowed his brow.
"They had a lot of money tied up in suspended merchant banks. Things were already looking unstable, and now they've blown up."
The other staff members also looked shocked, their mouths agape.
It was understandable—this was the first time since the 1963 stock market crash, which caused dozens of securities firms to collapse, that a brokerage firm had defaulted.
"If this turns into a final default, the ripple effects will be massive."
"Without a doubt."
Jung muttered grimly, and Choi Ho-geun nodded solemnly in agreement.
"I'm going to the president's office. In the meantime, dig up everything you can on what exactly is going on at Silla Securities—anything at all!"
"Understood!"
Grabbing the jacket draped over his chair, Choi Ho-geun left the office with quick strides, leaving behind Jung and the rest of the team who were already scrambling into action.
***
"So what you're saying is they managed to cover their call settlements up until the day before by raising emergency funds using their stock holdings as collateral, but now their main bank—who had been guaranteeing their payments—has pulled out?"
"That's right. Under normal circumstances, this wouldn't have resulted in a default, but with the IMF situation, even the banks are facing possible mergers or bankruptcies. It seems they decided to cut their losses and force a default, thinking they no longer have the capacity to continue the cycle of short-term borrowing to cover payments."
Seok-won, seated at his large desk, nodded slightly with the receiver held to his ear.
"Given the circumstances, they're probably barely managing their own survival."
"The banks have extended the promissory note settlement deadline until 4 PM today, but with an additional 201 billion won in notes coming due tomorrow, it looks unlikely that they'll get through this."
"I think so too."
Adjusting his grip on the receiver, Seok-won continued.
"If Silla Securities collapses like this, it's highly likely that other merchant banks in similar positions will follow in a domino effect. Keep a close watch, and if anything feels off, contact me immediately."
"Understood."
Ending the call with Lee Chul-gyun, Seok-won put down the receiver and let out a quiet sigh.
"So the real crisis is finally starting."
Many people mistakenly believed that receiving IMF bailout funds meant the crisis had been resolved—but that wasn't the case.
Right after the negotiations with the IMF were concluded, the presidential election and the resulting severe lame-duck period left the Blue House paralyzed, creating a vacuum in national governance.
At that moment, the entire financial sector was teetering on the edge of cascading defaults, and with the exchange rate surging out of control, the ship that was the Republic of Korea came dangerously close to sinking.
"If we make even one misstep here, we'll plunge straight into national bankruptcy."
Seok-won's expression grew increasingly grave.
Not only was the economic control tower effectively nonfunctional, but, worse yet, even the bare minimum safeguards had been dropped following the agreement with the IMF—including a liberalized exchange rate—leaving the country more vulnerable to shocks.
"The problem is figuring out what impact the slightly earlier onset of the IMF crisis—compared to what I remember—will have."
He tapped his finger on the desk as he thought.
The fact that things could now play out differently from the original history—where Korea had been pushed to the brink but ultimately overcame the crisis—was deeply unsettling.
"I have to prevent that no matter what."
That's why he had prepared a massive reserve of dollars, and as a further precaution, had borrowed an additional $20 billion using stocks as collateral.
As he calmly sorted out his next steps, a knock came at the door, and Na Seong-mi stepped inside.
"Choi Ho-geun from the Fund Management Department is here."
"Let him in."
"Yes, sir."
As Na Seong-mi stepped aside, Choi Ho-geun entered the president's office.
He approached the desk, gave a slight bow, straightened up, and spoke with a tense expression.
"I have something urgent to report."
Already knowing the reason for the visit, Seok-won leaned back in his chair and opened his mouth.
"You must have heard the news that Silla Securities has filed for preliminary bankruptcy."
Momentarily surprised, Choi Ho-geun quickly accepted it—it made perfect sense that someone like Seok-won would have received the news first.
"Yes, sir."
With his fingers interlaced, Seok-won spoke in a calm, heavy tone.
"Though it's only a preliminary default for now, their main bank has already pulled the plug. And as you know, the Ministry of Finance is in no position to issue an emergency bailout. They won't survive the day. Final default is almost certain."
Though Choi had suspected as much, hearing Seok-won state it so definitively made his expression grow even more rigid.
"They've already posted a 40 billion won loss just this year, and with 70 billion in mark-tomarket losses on equity products… Then their affiliate, Silla Merchant Bank, had its operations suspended, freezing the 150 billion they had lent out. It's no wonder they couldn't hold on."
A pained look came over Choi Ho-geun's face.
"It's still hard to believe… Silla Securities, which had been thriving and even just finished building a brand-new 22-story skyscraper in Yeouido, has gone bankrupt."
"They were so drunk on the party that they didn't even notice the crisis approaching—and this is the price they're paying for their complacency. But the real issue starts now."
Looking directly at Choi Ho-geun, Seok-won continued.
"This collapse has shattered the belief that financial institutions don't go under. With Silla Securities falling, it may spark widespread fear among the public and trigger a bank run."
The moment the word bank run —perhaps the scariest term in the financial world—came out of Seok-won's mouth, Choi reflexively swallowed hard.
"If that happens, the panic won't just be limited to troubled securities and merchant banking firms. It will spread to commercial banks and the broader financial sector, leading to massive withdrawals and freezing up the credit markets even further."
"..."
"In a crisis like this, securities firms will start dumping stocks and bonds indiscriminately in a desperate attempt to secure cash—regardless of the losses. That means the stock and bond markets, which had just shown signs of recovery over the past few days, will soon collapse."
"So the crash you predicted last time is finally coming."
"That's right."
Seok-won replied with a bitter expression.
But that only lasted a moment. He quickly shifted into a cold, strategic tone.
"When the market is gripped by full-blown panic and collapses, that's when we swoop in and buy everything."
Though the financial system and capital markets were on the verge of collapse, for Daeheung Venture Capital, which had a massive cash reserve and was just waiting for the right timing to enter, this was a golden opportunity.
Choi Ho-geun, fully aware of this fact, nodded with a gleam in his eye.
"Understood."
Seok-won issued detailed instructions on how to respond, then dismissed Choi from the office.
Once the door shut, Seok-won moved his mouse and opened the stock trading window on his monitor.
The news of the preliminary default had already spread. Silla Securities' stock price was plummeting, nose-diving on the screen.
Not only Silla Securities—on the verge of collapse—but even the other securities stocks that had been leading the market rebound just that morning were now tanking all at once.
"Soon the fear will spread beyond securities stocks to the entire financial sector—and then to the broader market."
As he imagined the coming storm, Seok-won stared at the market screen with a grave expression.