By Kim Jae-kyoung
Staff Reporter
U.S. policymakers and regulators are putting their heads together to fix the troubled financial system. They came up with a monumental $720 billion bailout plan.
However, regardless of the outcome of the rescue package, it will not be easy for the U.S. government to put its financial system back on track and restore the credibility of a system once touted as the most sophisticated in the world.
Jeffrey Jones, former
AMCHAM Chairman |
A well-known international lawyer said that the U.S. needs to take a lesson from Korea to clean up the mess, noting that the mortgage problem in the U.S. is similar to the credit card industry boom in Korea in early 2000.
``It is not unlike the credit card problem we had in Korea and the U.S. could learn some things from the way in which Korea handled that problem,'' former AMCHAM Chairman Jeffrey Jones told The Korea Times.
``The U.S. needs to establish policies to help people stay in their homes and continue to pay their mortgages, helping the default rate stop,'' he added, suggesting that the U.S. take a lesson from some of the programs Korea used, such as the personal debt workout program.
The personal debt workout program, which was designed to save Korean individuals saddled with heavy debts, helped them pay off their debts on a continuing basis and recover their tainted credit status.
``Also, U.S regulators must remind all financial institutions to be prudent over credit and maintain traditional credit risk policies even in the face of tremendous pressure to let credit get easier in a booming economy,'' he said.
Likening the Wall street crisis to Korea's credit card trouble, Jones pointed out that back then in Korea, if a person was breathing, they qualified for a credit card irrespective of their job status, credit status, and income level.
``Like the mortgage lenders in the U.S., the Korean credit card issuers forgot traditional credit policies that should be applied in issuing plastic cards and Korea ended up with more than 3 million people with defaulted credit cards ― still a drain on Korea's economy,'' he said.
``If during the housing boom in the U.S., lenders applied traditional credit policies in lending, the U.S. could have very easily avoided this crisis,'' he added. ``Traditional good lending practices were ignored because of the competition to get borrowers as customers.''
He explained that housing prices were rising so quickly that bankers and other lenders were ignoring good credit practices assuming the risks they were taking were okay given the increase in housing prices.
On a question over where the U.S. crisis is heading, he said, ``It is still too early to tell when this will bottom out.''
``So we have not seen the end of this problem as yet. The primary problem is we don't know the size of the problem or how bad it will get,'' he added.
But he strongly countered the argument that the demise of giant American investment banks has brought an end to U.S. capitalism, saying, ``U.S. capitalism is not failing.''
Jones, a naturalized Korean who has lived in Korea since 1980, stressed that in order to address the underlying issue, the U.S. government should make all-out efforts to rehabilitate its housing market.
``Essentially, confidence in the U.S. housing market needs to be restored which requires people to have jobs," he said.
kjk@koreatimes.co.kr
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