Lee Jae-myung Visits Exchange: "Legoland Incident, Government Neglecting Crisis is the Core Risk"

"Icy Economic Crisis... Ice Broken by Kim Jin-tae's Misstep"

Lee Jae-myung, leader of the Democratic Party of Korea, is delivering opening remarks at the "Emergency On-site Inspection for Financial Crisis Measures" held on the 27th at the Korea Exchange in Yeouido, Seoul. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Lee Myunghwan] Lee Jae-myung, leader of the Democratic Party of Korea, criticized the government's delayed response regarding the credit market liquidity crunch caused by the Legoland debt default incident.

On the afternoon of the 27th, during an urgent on-site inspection for "Financial Crisis Countermeasures" at the Korea Exchange Seoul building in Yeouido, Lee said, "It is the government's role to mitigate or resolve economic risks, but now the government itself has become the core of the risk."

He diagnosed the Legoland incident by saying, "Despite the financial crisis triggered by Kim Jin-tae, the government neglected it for nearly four weeks, allowing the crisis to become a reality. This market panic is caused by the government's incompetence and lack of measures." He added, "In this economic crisis situation like walking on thin ice, Governor Kim Jin-tae of Gangwon Province's misstep broke the thin ice," and "Cracks have spread throughout the stock market, causing serious confusion and crisis in the economy, capital market, and financial market."

This is interpreted as a remark pointing to the credit market liquidity crunch issue that arose when Kim Jin-tae, a member of the ruling People Power Party and Governor of Gangwon Province, filed for rehabilitation of Gangwon Jungdo Development Corporation (GJC). The asset-backed commercial paper (ABCP) worth 205 billion KRW issued by I-One Jeilcha, a special purpose company established by GJC to finance the construction of Legoland, was not repaid on its maturity date of last month 29th and was ultimately declared default on the 4th of this month.

Gangwon Province provided a debt guarantee when GJC issued ABCP worth 205 billion KRW through BNK Investment & Securities in 2020 to promote the Legoland theme park development project. When a default occurred in local bonds with credit ratings comparable to government bonds, the bond market rapidly froze.

Lee also called for the government to devise solutions to resolve the situation. He said, "There are nearly 70 trillion KRW worth of corporate bonds maturing by the first half of next year," and criticized, "The IMF crisis was also caused by the government's complacency and delayed response, which led to a national crisis. Isn't the government's current awareness similar?" He added, "I think now is the time for the government to make every effort to stabilize the market."

He also urged measures to stabilize the stock market. Lee emphasized, "Temporary restrictions on short selling, which I have mentioned before, can be implemented anytime, and securities stabilization funds can also be utilized. But the attitude of 'the market will handle it on its own' is causing trust to decline and anxiety to grow," and stressed, "We must do what we can in advance to respond to and overcome the crisis."

Before the inspection, Kim Hak-gyun, head of the research center at Shin Young Securities, briefed on the recent stock market decline, diagnosing, "The stock price adjustment is due to rising interest rates," and "Since the consumer price index has not turned down from its peak, I think the base interest rate should be raised until November." He advised, "When central banks raise interest rates, the increase can cause problems with a time lag, so we need to remain vigilant until next year," and "Credit risks arising from rising interest rates must be well managed."

Following Lee's remarks, Baek Hye-ryun, chairperson of the National Assembly's Political Affairs Committee, conveyed the news that Gangwon Province decided to repay the guaranteed debt by the 15th of next month, and criticized, "The party responsible for causing the credit and financial market crunch by saying they couldn't repay is now saying they can repay. This acknowledges that Legoland was viewed from a political logic rather than market logic from the start." She sarcastically added, "A new term 'Jintaeyangnan' (a pun on Kim Jin-tae's name meaning 'Kim Jin-tae's dilemma') has even emerged."

This content was produced with the assistance of AI translation services.