November 7, 1997
– Government Complex I, Gwanghwamun
It was Ipdong, the day marking the official beginning of winter, and a sharp chill filled the air.
Inside the Deputy Prime Minister's office for Economic Affairs, senior officials from the Ministry of Finance and Economy had gathered under noticeably grim expressions.
Although the government had managed to conclude negotiations with the IMF after a difficult process, the backlash from the public was intense. Accusations were flying, and political attacks were mounting. The faces of the officials looked even more worn and weary than before.
Deputy Minister for Economic Affairs, Choi Jin-woo, looked especially exhausted. On top of being summoned to the National Assembly, he had to undergo an audit by the Board of Audit and Inspection. Heavy shadows clung beneath his eyes.
He looked like a man burdened with a tremendous weight he had to carry alone.
As the air in the room sank heavier, Deputy Minister Choi, a cigarette wedged between his fingers, looked at the seated officials and finally spoke.
"So the first tranche of IMF funds—5.2 billion dollars—has already been used up?"
Finance Policy Director Jung Ji-hoon, who received the question, answered with a tense face.
"Yes, sir."
"What? It hasn't even been that many days since we received the dollars—how could it all be gone already?"
Choi's voice was brimming with frustration. Director Jung, looking flustered, tried to explain the situation as if offering an excuse.
"We had hoped that once the IMF deal was settled, foreign investors and financial institutions would stop pulling out their money and that international trust in Korea would be restored. Unfortunately, that wasn't the case."
"..."
"Instead, they seem to see the IMF rescue funds as their ticket out of Korea."
Watching Choi's frowning expression, Jung cautiously continued.
"Many had wanted to pull out of Korea before, but there simply weren't enough dollars in the domestic market to do so. Now that the IMF funds have come in, they see this as their chance and are quickly converting to dollars and taking their capital overseas."
At that point, Vice Minister Shin Seung-gi, seated on the left sofa, interjected with a stiff expression.
"It looks like our predictions were off."
"Hmm…"
Letting out a groan, Choi furrowed his brows, clearly troubled.
"We went through hell to secure those dollars despite all the public criticism—yet instead of halting the capital flight, it's only accelerating. This is absolutely maddening."
The IMF funds had essentially just passed through the Bank of Korea briefly before being snatched up by foreign hot money and international creditors and then promptly flown overseas.
It was enough to make anyone furious.
With a deeply concerned look, Vice Minister Shin added:
"We've urgently requested that the IMF expedite the second tranche of funding. But if this capital flight continues, we'll just be pouring water into a bottomless jar."
"You're probably right."
Deputy Minister for Economic Affairs, Choi Jin-woo, brought a cigarette to his lips, lost in deep thought.
He inhaled the smoke deeply, then slowly exhaled, voicing the idea that had come to mind.
"What if we temporarily restrict foreign currency exchange amounts?"
"That might reduce the immediate outflow," replied Director Jung Ji-hoon, "but unless foreign investors change their fundamental view that Korea is still unstable, it would only buy us time. It won't stop the dollars from flowing out in the long run."
Vice Minister Shin Seung-gi added his own reservations, his tone equally skeptical.
"Restricting capital outflows would violate the agreement we signed with the IMF. It could lead to serious consequences."
Choi Jin-woo let out a quiet sigh and nodded slightly.
"The ruling and opposition presidential candidates are already calling for renegotiations. If we make a wrong move, things could spiral out of control."
Clicking his tongue in frustration, he turned to Shin and asked:
"Since we're on the topic, how has the IMF reacted to the candidates' remarks?"
"Publicly, they're downplaying it. They emphasize that all candidates signed a letter of commitment before the agreement and treat the comments as nothing more than campaign drama."
Shin's tone grew more serious as he continued.
"But unofficially, Director Townsend has warned that if the candidates don't retract their renegotiation statements, the IMF might suspend the promised aid."
"Damn it!"
A curse burst from Choi Jin-woo's mouth as he heard the report.
"Every day feels like walking on a tightrope, and instead of helping, these politicians are doing nothing but making a mess. It's infuriating."
His face twisted with irritation as he vented his anger.
It was already frustrating enough to be blamed as the culprit behind the foreign exchange crisis— now the politicians were making reckless statements that could derail everything.
But with the nation teetering on the edge of collapse, he couldn't afford to just sit back and do nothing. Grinding out his almost-finished cigarette in the ashtray, he spoke firmly.
"Convince the IMF to release the second tranche of aid—whatever it takes. If the bailout is suspended, we may be forced to declare a full-blown moratorium."
"…I'll do my best."
Choi fixed Shin with a hard stare.
"It's not about trying. You must get it done—by any means necessary. If we fail now, everything we've worked for will be for nothing."
"Understood."
Deputy Minister Shin Seung-gi, his voice edged with urgency, wore a resolute expression.
"They may be completely consumed by the election and unwilling to listen, but I'll try to meet with both ruling and opposition presidential candidates."
Both sides were fiercely criticizing the IMF agreement in an attempt to boost their poll numbers.
The chances they would be receptive were slim, but doing nothing was not an option.
"To help appease the IMF even slightly, what do you think about shutting down five additional securities finance companies in the Seoul area with high debt ratios?" suggested Director Lee Dong-wook, cautiously watching the others' reactions.
"Another round of shutdowns?"
"Yes. That might also prevent a wave of corporate bankruptcies caused by these troubled firms indiscriminately calling in their loans."
Deputy Minister Choi Jin-woo rubbed his chin in thought for a moment before making a decision.
"It hasn't been long since we ordered the temporary closure of nine other securities finance companies. If we issue another round of suspension orders, the backlash won't be small. Still, under the circumstances, we don't have much choice. Go ahead and proceed."
"Yes, sir."
Choi turned to look at Shin Seung-gi.
"What's the latest on the dollar bond issuance KDB is working on?"
"They're holding investor briefings in New York and making a strong sales pitch."
"This is something we absolutely must succeed in. Rebuilding trust with foreign investors and escaping this currency crisis depends on it. Keep a close watch on the situation, and if they need anything—support them however you can."
"Understood."
After giving a few more instructions, Choi Jin-woo leaned back into the sofa, pressing a hand to his throbbing forehead.
Even after securing financial assistance from the IMF, the situation wasn't improving—in fact, it seemed to be worsening by the day. His chest felt increasingly tight with frustration.
***
That night.
Dressed in comfortable clothes, Seok-won sat alone on the plush living room sofa, sipping wine as Vivaldi's Four Seasons played through his European high-end tube amplifier and speakers.
As expected, the sound was in a different league—every cent spent had been worth it.
With his eyes closed, he savored the melody that evoked images of aristocrats dancing in a grand ballroom. Just then, like an unwelcome visitor, a buzzing vibration cut through the air.
He picked up his phone from the coffee table and checked the screen. The call was from Landon in New York.
"It's me."
Lowering the music volume with the remote, Seok-won answered the call immediately.
Hearing the background music, Landon gave a small exclamation.
[You were listening to music? Hmm… that sounds familiar… Vivaldi?]
"That's right. I didn't know you were familiar with classical music."
[I attend concerts now and then for charity events. It's mostly for networking, to be honest, but I do enjoy the powerful resonance of live instruments.]
Seok-won took a sip of his wine and replied,
"I was trying out my new Focal speakers to see how they sound."
[Focal? That's one of the most renowned brands in Europe.]
That was exactly right, and Seok-won smiled faintly.
"They live up to their reputation. Anyway, did you attend the global bond investor briefing hosted by KDB?"
[Yes. Just as you suggested, I attended it in person.]
Before issuing dollar-denominated bonds, KDB had hosted an investor presentation at the Plaza Hotel in New York to gauge interest from major Wall Street investors.
Naturally, the Eldorado Fund—now more than a rising star and a major player with serious influence on Wall Street—had received an invitation.
"How were the bond terms?"
[They're offering a three-year maturity with an interest rate of LIBOR plus 300 to 350 basis points.]
"So, compared to the 4-year dollar bond KDB issued back in May, they're offering almost four times the spread."
[They probably raised the rate to reflect Korea's recent acceptance of IMF bailout funds.]
"Right, the situation has changed since then. If they offered the same terms now, no one would buy those bonds."
[Exactly.]
With the risk of investing in Korea significantly higher, a higher return was only natural.
"How was the atmosphere at the briefing?"
[Many big-name institutions showed up—JP Morgan, Goldman Sachs, Citibank, and other major commercial banks were all there and seemed quite interested.]
With the phone pressed to his ear, Seok-won asked, his voice tinged with hope,
"So we can expect the issue to be a hit, then?"
But Landon's reply was far from optimistic.
[Well… I'm afraid that may be difficult.]
Seok-won frowned. "You just said plenty of people showed interest."
[After the briefing I spoke with several attendees. They all said the yield is still too low.]
"But KDB raised the spread to almost four times what it offered on the bonds it issued only a few months ago."
[Exactly—yet Wall Street still thinks the risk on Korea is high.]
Seok-won let out a bitter sigh. "Because the presidential candidates keep talking about renegotiating the IMF deal, right?"
[That's part of it, but many believe Korea won't easily bounce back from the IMF program and return to normal.]
"So one of the four Asian tigers has crashed and turned into a snake."
[Precisely. Some even predict Korea will stumble into a middle-income-trap mess—like Mexico or the Philippines—and may well collapse altogether.]
That alone made it clear how overseas investors, especially on Wall Street, now viewed Korea.
"If that's the sentiment, KDB might fail to place the bond at all."
[The odds of failure are quite high.]
Because KDB was a state-backed policy bank, its creditworthiness effectively mirrored Korea's own.
If no one was willing to buy the dollar bonds it issued, it meant market confidence in Korean sovereign debt had fallen to junk-bond territory.
"And if KDB does fail, the foreign-capital exodus from Korea will accelerate even more."
[Undoubtedly.]
Seok-won gave a heavy nod.
"Alright. Let me know right away if anything changes."
"Yes, I will," came the reply.
After ending the call and lowering the phone from his ear, Seok-won picked up his wine glass, his expression clouded with gloom.
"If word gets out that the bond issue failed, panic will explode instantly… and the exchange rate will skyrocket through the roof."