September 3, 1997, Gwacheon Government Complex.
In the office of the Minister of Finance and Economy, Vice Prime Minister of Economy Lee Eun-hyung sat on the sofa, flanked by Vice Minister Shin Seung-gi and Financial Policy Director Jung Ji-hoon on either side.
The atmosphere in the room was heavy, reflecting the worsening situation in the foreign exchange market—contrary to their hopes.
Lee Eun-hyung ground out his half-smoked cigarette in a crystal ashtray and finally broke the silence.
"I heard they've halted trading in the forex market again today. Is that true?"
Jung Ji-hoon, wearing an uncomfortable expression, nodded.
"Yes, sir. The demand for dollars was overwhelming. If we had let it continue, the exchange rate would've likely broken through the 1,000-won mark, so we had no choice."
Before Jung could even finish, Lee Eun-hyung slammed his palm hard on the sofa armrest and roared.
"This is the third straight day! We announced measures to stabilize the financial markets, yet the forex market is in such chaos that trading gets suspended three days in a row. Why the hell is this happening?"
Pressed by the sharp question, Jung Ji-hoon wiped the sweat beading on his forehead and answered.
"Despite the stock market falling, instead of slowing down, foreign investors are accelerating their pullout, cashing out their domestic investments. On top of that, domestic companies are scrambling to secure dollars, so the demand is relentless, and the won won't stabilize."
He kept glancing nervously, his words sounding more like excuses, prompting Lee Eun-hyung to frown deeply.
"Even if the foreign investors are a problem, we ordered banks to require proof of genuine need for dollar exchanges over ten thousand dollars. Are you saying demand still hasn't dropped?"
"That's correct."
At that, Vice Minister Shin Seung-gi, seated opposite, spoke up in a stern tone.
"It seems that, contrary to our intention, the exchange restrictions have only fueled anxiety among finance companies and businesses, causing side effects."
Seeing Lee Eun-hyung's eyebrows knit tighter, Shin pressed on.
"As you know, merchant banks alone are sitting on over $12.9 billion in short-term foreign debt."
"..."
"In this climate, the restriction measures sparked panic. Already facing huge forex losses, they're terrified they won't even be able to get dollars even if they pay a premium. That fear has triggered a surge in speculative demand—everyone's hoarding dollars."
"Damn it!"
Lee Eun-hyung cursed under his breath. The worst-case scenario they had feared before rolling out the stabilization measures was now becoming reality.
This wasn't just speculative hoarding driven by fear of rising rates—it was desperate, real demand from companies that genuinely needed dollars, willing to take losses just to secure them. But Jung Ji-hoon, fearing the wrath of his superior, kept that point to himself and stayed silent.
Amid the tense air, Shin Seung-gi cautiously glanced at Lee Eun-hyung's furious face before speaking again.
"Before things spiral even further, we need to take stronger measures."
"And what exactly are you suggesting?"
As Lee Eun-hyung questioned him, Shin Seung-gi leaned forward.
"Like Hong Kong did, we raise the base interest rate and intervene more aggressively—deploying our forex reserves proactively to defend the won."
"Aren't we already defending the won?"
"Right now, we're only selling dollars reactively when the rate hits a danger zone. What I'm suggesting is a preemptive strike—flooding the market with enough dollars to stamp out panic before it escalates."
Lee Eun-hyung folded his arms, his face clouded with deep thought.
"That would take a massive amount of dollars."
"Even if we go big, $10 billion should be enough to calm the markets."
"Our total reserves are around $59 billion. You're saying we should commit $10 billion of that?"
Vice Prime Minister of Economy Lee Eun-hyung raised one eyebrow as he shot back a question.
But despite the sharp gaze leveled at him, Vice Minister Shin Seung-gi pressed on, undeterred, continuing his persuasion.
"If we let this panic grow any further, it will only cost us even more dollars to stabilize things later. It's better to act preemptively now and stop this before it turns into a fire we can no longer contain."
"Hmm…"
Lee Eun-hyung stroked his chin, lost in thought.
Spending an amount equal to 17% of the nation's total foreign reserves was no small matter. His hesitation was natural, given the gravity of such a move.
At that moment, a knock sounded at the door, and a staff member from the secretariat rushed in, looking flustered.
Irritated at the sudden interruption, Lee Eun-hyung furrowed his brow and barked out sharply.
"What is it?"
Under his fierce gaze, the staffer flinched for a moment before hastily gathering his thoughts and blurting out the message.
"There's urgent news I need to report, sir."
"Speak."
Lee Eun-hyung's reply was curt, his patience worn thin.
"Moody's is set to downgrade the credit ratings of four major domestic banks."
At the unexpected bombshell, not only Lee Eun-hyung but also the two others in the room widened their eyes in shock.
"Is that true?!"
Lee Eun-hyung shot back with a look of disbelief, his voice rising.
"Yes, sir. Bloomberg just put out a breaking news alert about it."
"Damn it…"
Lee Eun-hyung's face twisted in frustration. He pressed his temples, trying to massage away the pounding headache that was building behind his skull.
"This just keeps getting worse by the minute…"
***
[WooYoung, Hanseong, and Ilhan Banks have been downgraded from Baa2 to Baa3, while Korea Exchange Bank has been knocked down to Baa2.]
Standing before the floor-to-ceiling window that offered a sweeping view of the glittering night skyline, Seok-won had one hand casually tucked into his trouser pocket. He responded calmly to Landon's voice on the line from New York.
"Baa3… That's one notch above junk bond territory. Just a step away from being deemed non-investment grade."
[That's right. And on top of that, the short-term credit ratings for all four banks have been cut from Prime-2 to Prime-3.]
"Naturally. When the long-term outlook tanks, the short-term ratings are bound to take a hit too."
For banks—where trust and creditworthiness are everything—a downgrade in credit rating was no trivial matter. It was a serious blow.
And the four banks in question weren't minor players. They were some of the biggest commercial banks in the country. The ripple effects would be massive—anyone could see that.
Yet Seok-won's composed reaction made Landon on the other end of the line sound slightly deflated as he asked,
[Did you anticipate this would happen?]
As always, Seok-won replied in his calm, measured tone.
"With major conglomerates like Hanbo and Gichang Group going bankrupt one after another, the amount of bad debt now sitting on the books of the major commercial banks—including the four that just got downgraded—isn't clear yet, but even by conservative estimates, it's at least 13 trillion won."
He gave a slight shrug as he continued.
"So frankly, the downgrade was inevitable. We're talking about losses totaling 14.4 billion U.S. dollars."
[Now that you put it that way, it does make sense.]
"But more importantly, this downgrade will serve as a signal—a milestone of sorts—that tells hedge funds, already seething from their losses in Hong Kong, that Korea is their next target."
[Actually, I was just about to mention this. Right after Moody's announcement, big banks like Citi, BOA, and Barclays are reporting a noticeable uptick in hedge funds drawing fresh lines of credit.]
At that, Seok-won's eyes flashed as he kept the phone pressed to his ear.
"If they're raising capital, that means they've picked their next prey and are gearing up to move."
[That's very likely.]
Though he'd mentally prepared for this moment, seeing concrete signs that the hedge funds were about to strike made Seok-won's face tighten grimly.
"What about Quantum Fund? Any word on their movements?"
[They've already gone a step further. We've got intel that they're raising large amounts of Korean won, sourced from Japanese banks.]
"Japanese banks, huh… Well, among the big players, they're the ones that hold the most Korean won, compared to dollars or yen, given how much business they do with Korea."
A bitter smirk tugged at the corner of Seok-won's lips.
[From the way things are shaping up, the moment the dollar-won exchange rate breaks through the 1,000-won mark, that'll be their signal to launch a full-scale attack.]
"If that psychological line gets breached and a massive selloff of the won follows, the market's going to spiral into sheer panic and fear."
[And that's exactly what the hedge funds are counting on.]
There was a brief pause before Landon continued, his tone now even more cautious.
[And after what they learned from Hong Kong, I doubt they plan to drag this out. They'll want to end it quickly—hit fast and get out.]
"If I were in their shoes, I'd do the same. And let's face it—Korea's foreign reserves are much smaller than Hong Kong's, and they don't have any powerful backers to come to their rescue. This fight won't last long."
He swallowed back the biting remark that was on the tip of his tongue—that Korea's politicians and currency officials were nowhere near capable enough to handle an assault like this.
[Once Quantum Fund and the other hedge funds launch their attack, what should our move be?]
"Just like we discussed before—we stay out of this one. We watch and observe. No need to get involved."
[Understood.]
Landon, already sitting on hefty profits from their previous ventures, simply accepted the order without argument.
[Ah, by the way—Nick Reynolds reached out. He says he'd like to meet with you.]
Seok-won paused, rifling through his memory until the name clicked.
"You mean the CEO of Qualcomm?"
[That's right. I suspect they've caught wind of our aggressive buying spree of Qualcomm shares and want to open a dialogue.]
Seok-won, momentarily pulled back from the looming IMF crisis that had consumed his attention, recalled the Qualcomm matter and asked,
"How much have we acquired so far?"
[As of today, we've crossed the 21% threshold.]
"You've picked up quite a lot of shares in the meantime."
[Yes. After Black Monday, when the New York Stock Exchange tanked and Qualcomm's stock plunged over 30%, we followed your instructions and scooped up shares on the cheap while everyone else was panic-selling.]
"Well done."
Landon chuckled softly before asking again.
[They reached out to me again today—how would you like me to handle it?]
Seok-won fell silent for a beat, then slowly shook his head.
"We've already committed to a hostile takeover. There's no reason to sit down with them face-to-face just yet. If anything, we should wait until we've firmly secured the upper hand. For now, just keep focusing on accumulating as many shares as possible."
[Understood.]
After talking through a few more details, they ended the call. Seok-won snapped his phone shut and slipped it back into his pocket.
Turning back to the floor-to-ceiling window, he muttered, his voice heavy and low.
"How long can Korea really hold out if those hedge funds, already foaming at the mouth, launch their full-scale assault?"
Maybe until year-end… or perhaps, not even another month.
"If they'd just abandon defending that exchange rate band and let the won float, things might stabilize somewhat… but that's not going to happen, is it."
Under normal circumstances, perhaps. But with a critical presidential election looming, there was no chance the Blue House and the government would willingly let the current system unravel.
"Of all times… a full-blown currency crisis right before the election. Talk about rotten luck."