BY MAURICE WILLIAMS
The Bank of Korea, south Korea's central bank, announced November 17 that it was dropping its efforts to hold the nation's currency link to the U.S. dollar. The announcement came the same day that the 10th largest bank in Japan, Hokkaido Takushoku Bank Ltd., went belly up. Both moves reflect a deepening crisis for the capitalist rulers as the storm of currency devaluations continues to hammer the region.

A financial collapse in Seoul would compound the economic turmoil gripping Southeast Asia. It has the world's 11th largest economy and a gross domestic product larger than Thailand, Indonesia, and Malaysia combined.

In response to the nation's currency woes, south Korean president Kim Young Sam dumped his finance minister, Kang Kyung- Shik, on November 19 as the Korean won fell to a record low of 1,035 to the dollar. The currency has dropped 16 percent this year, which among other things means that south Korean banks and companies must use more won to repay dollar-denominated loans.

The country's foreign debt is estimated at $160 billion, with about $30 billion of that amount due by the end of the year.

Investment banks, which specialize in short-term corporate financing, have had their credit lines cut by foreign lenders. "We've been discouraging new lending," said a foreign banker in Seoul. This action could result in a new wave of bankruptcies.

South Korea's debt crisis has provoked the collapse of seven of the nation's top 30 conglomerates this year. Each corporate failure chips away at the banks' dwindling finances. The nine largest financial institutions in the country already have bad loans that add up to between 94 and 376 percent of the banks' capital. Enormous loans have invested in industries such as steel, semiconductors, and petrochemicals, including $1 trillion in domestic loans. Hanbo, a steel conglomerate, and Kia, an auto manufacturer, have both gone under, leaving banks with massive bad debts.

Working people have put up resistance to the bosses' and the government's attempt to impose job cuts and other austerity "reforms," presented as measures needed to restore financial stability. Employees at the Bank of Korea rallied in the streets November 17 and threatened to walk off their jobs en masse if proposed legislation is passed that includes cuts in the staff. Some 15,000 auto workers at Kia Motors Corp. launched a 13-day strike October 21 to prevent job losses among the 22,000 employees in the plant.

Last January, hundreds of thousands of workers in south Korea took part in a general strike for more than three weeks to demand the repeal of antilabor legislation that restricted union rights, allowed companies greater latitude to impose layoffs, and gave additional powers to the secret police.

The financial turmoil haunting south Korea has evoked increasing alarm among U.S. ruling class figures who touted the country as a role model for Asia's so-called developing nations. "You almost wonder today whether South Korea will collapse before North Korea," complained New York Times columnist Thomas Friedman in his November 17 opinion piece. Washington maintains 37,000 troops in south Korea as a weapon aimed at the workers state in north Korea, which also suffers from food shortages.

The U.S. wealthy class is nervous that the bank failures and currency instability in Asia, especially in Japan, could resonate across the Pacific and wreak havoc on the U.S. banking and credit system. U.S. deputy treasury secretary Lawrence Summers flew to Tokyo and later to the Philippines for a November 19 conference to discuss the Asian financial crisis that included ministers and central bankers from 14 countries, as well officials from the International Monetary Fund and the World Bank.

10th largest bank collapses in Japan
Japan's economy is on the brink of a recession as a banking crisis unfolds there. Government statistics dated March 31 report Japan's financial institutions carrying around $250 billion in problem loans.

Hokkaido Takushoku Bank Ltd went under November 17 with an estimated $10 billion in bad loans. Regulators said Japan's 10th largest bank will be dissolved at the expense of shareholders - mostly other financial institutions. It was the first failure of any of the top 20 banks in Japan.

Government officials at the banking bureau of Japan's Ministry of Finance tried to pressure other banks to merge with the failed one, but bank officials balked due to increased competition and their own financial problems. That left the bureau with the option of turning over Hokkaido Takushoku's branches to North Pacific Bank, its rival based in the same region.

"I strongly urge depositors not to worry and to take sensible actions," pleaded Japanese finance minister Hiroshi Mitsuzuka at a news the morning the bank collapsed. Tokyo was concerned about the possibility of bank runs that would exacerbate the growing instability of the country's financial system.

Bank deposits and loans to the bank are supposedly guaranteed by the Bank of Japan and the Deposit Insurance Corporation, a banking industry deposit program. Politicians are now floating the idea of using public funds to shore up the fragile banking system. When Tokyo pumped hundreds of billions of dollars into seven housing lenders that went bankrupt in 1995, it sparked protests.

Meanwhile, the Japan Chamber of Commerce and Industry reported that more than half of its branches received complaints about banks refusing loans. Another report published November 17 by Tokyo Shoko Research stated that more than 1,600 companies in Japan went bankrupt in October, an increase of 15 percent and the highest level in more than a decade.

Deputy Treasury Secretary Summers met with Japan's finance minister November 17 to discuss Washington's uneasiness over the stagnant Japanese economy and the rapid depreciation of the yen.

Tensions between the two imperialist powers was reflected in a letter sent in early November by U.S. treasury secretary Robert Rubin warning Tokyo not to try to export its way out of its economic problems at the expense of its rivals in the United States. Summers went to Tokyo to stress that message and voice the Clinton administration's irritation with a rise in the U.S. trade deficit. "It is clear that substantial increases in the Japanese current account surpluses are troubling to the U.S.," Summers asserted.

Some U.S. investment banks have been socked by the currency turmoil. The investment ratings of three major U.S. banks -Bank America, Chase Manhattan, and JP Morgan - were downgraded November 12 by a prominent Wall Street analyst. George Salem of Gerard Klauer Mattison explained his move saying, "The crisis is broader and deeper, and appears longer lasting than we envisioned even a few weeks ago." Chase Manhattan, the largest U.S. bank, reported a $160 million loss in October.  
 
 
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