[The Editors' Verdict] Conviction, Government Control, and Populism

Kim Joo-hyun's Dismissal Rumors and the Short Selling Ban
Populist Policy Moves Amid Government and Ruling Party Control Ahead of the General Election

Kim Joo-hyun, the Financial Services Commission chairman who was suddenly caught up in dismissal rumors, originally planned to step down voluntarily at the end of the year. He had led the Financial Services Commission smoothly for about a year and a half and intended to retire honorably ahead of the upcoming general elections and expected cabinet reshuffle next year. However, his plan was derailed in an instant. The balance tipped toward a dishonorable dismissal rather than a voluntary resignation.

The issue arose due to the controversy over the temporary ban on short selling. On the surface, the ruling party took the lead in pressuring the financial authorities, but it was a significant matter as President Yoon Seok-yeol himself emphasized the necessity of the (short selling ban) and provided support.

The ban on short selling can especially be seen as a populist measure introduced ahead of the general elections. It strongly reflects an attempt to appease the worsening sentiment among individual investors after the illegal short selling activities by a major foreign investment bank (IB) were revealed. Moreover, the current election landscape is not favorable to the ruling party, making it imperative to capture the votes of the "14 million ants" (individual investors) by any means.

The government and ruling party acted based on this calculation, but Chairman Kim Joo-hyun consistently held a negative stance on the short selling ban. He maintained this position even during the National Assembly’s Finance and Economy Committee audit held last month. He did not compromise his conviction. However, things did not go as he wished. Under pressure from the government and ruling party, he had to decide to suspend short selling in less than a month. During this process, it appeared as if he was not actively promoting the policies desired by the government and ruling party.

In fact, from the government’s perspective, any noise surrounding policies is unwelcome. It would be particularly embarrassing if there were disagreements with a senior official who does not bend their principles. However, if there is a possibility that conflicts could escalate, it is problematic to leave them unattended.

That said, if the government and ruling party suppress dissent as they did this time, it is hard to expect diverse voices within the government. Even within the Financial Services Commission, there are quite a few who defend the positive functions of short selling. But in an atmosphere where the answer is already decided, who would dare to voice opposition?

The controversy over the short selling ban is related to policy philosophy and execution within the government. However, it can also be seen as an extension of the “government-controlled finance” controversy targeting the banking sector under the Yoon Seok-yeol administration, which has been under concentrated fire. It resembles the situation where the person involved is easily swayed by a sharp remark deliberately made by a powerful authority.

The Yoon Seok-yeol administration has issued strong statements particularly targeting the banking sector, which is among the most profitable financial industries. Examples include warnings against Sohn Tae-seung’s attempt to renew his term as chairman of Woori Financial Group, threats to curb deposit interest rate competition among commercial banks, and orders to strengthen the public nature of banks.

The financial industry inherently pursues private profit but also demands public responsibility. This duality arises because its impact on corporate activities and the everyday economy is relatively enormous compared to other industries. At this point, some degree of government “control” is tolerated.

However, if the government uses its power to suppress opposition backed by public opinion (or to gain public support), discord is inevitable. Especially as the election season approaches, exhibiting populist behavior while ignoring side effects is extremely risky. Like a racehorse running forward with blinders on, the field of vision inevitably narrows.

Government control that excludes public interest and transparency inevitably leads to aftereffects. Control that risks turning into populist policy is even more precarious.

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