Seoul Mayor Oh Se-hoon has sharply criticized leveraged derivative products and President Lee Jae Myung's push for aggressive debt forgiveness.
Oh posted on Facebook on Friday, writing that "the Lee Jae Myung government is teaching young people something — that the harder you work honestly, the more you lose," and that society has made "only the youth who diligently repay their debts into fools."
He said the Kospi sidecar mechanism had been triggered 37 times this year, already surpassing the 26 times recorded throughout all of 2008 during the global financial crisis. "This is the result of approving single-stock leveraged derivatives despite knowing the risks, and standing by while retail investors watched their assets evaporate," he said.
Oh added that capital markets had been "the last bastion where young people could dream of moving up in a society where the ladder of saving a salary to buy a home has been cut off — but that bastion is now operating as a cruel trap."
He said the government had only belatedly announced a measure to raise the minimum deposit for single-stock leveraged ETFs to 30 million won ($20,200), calling it "a lock that should have been put in place long ago, hastily fixed only after young people had been driven to the brink of financial ruin." The government earlier raised the minimum deposit to 30 million won, requiring it to be held entirely in cash. Existing investors must also maintain a cash balance of 30 million won each time they make additional purchases.
Oh also said President Lee had again called for the cancellation of long-overdue debts while dismissing concerns about moral hazard as "irresponsible agitation." "On one side, young people are being pushed into a gambling den; on the other, the government is grandstanding with debt forgiveness," he said.
He warned that "the tragedy in capital markets is becoming a domino bomb spreading to the real estate market," saying the collapse of the speculative market would ultimately drive up home prices and cruelly undermine the residential stability of young people.
Oh said "a country that strips young people of the opportunity to build healthy assets has no future," and called for a comprehensive audit of the approval process for high-risk derivative products and fundamental measures to restore the health of capital markets.
won@heraldcorp.com
