New Employees With an Annual Salary of 1 Trillion Won - Chapter 159

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This chapter was translated by Lunox Team. To support us and help keep this series going, visit our website: LunoxScans.com
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Chapter 159. Cleanup (4)

Many investment banks (IBs) on Wall Street convened emergency meetings.

Lehman Brothers, the top investment bank in the United States, reacted particularly sensitively.

They held an emergency meeting to address Tiger Fund’s acquisition of Hana Bank to monopolize real estate derivatives.

“Tiger Fund is finally showing their greed. They’re trying to monopolize all the fees for themselves.”

“They’re playing dirty tricks by acquiring a small Korean bank. We need to mobilize financial authorities to stop them!”

“Hmm, that’s too risky. Tiger Fund has formed deep connections with the White House. We might get caught in the crossfire unnecessarily.”

The Lehman Brothers Representative was reluctant to involve financial authorities.

Attacking Tiger Fund could result in losses for themselves as well.

“The CEO is right. To protect our existing real estate derivatives contracts, we shouldn’t directly attack Tiger Fund.”

“It’s true that our sales increased this year thanks to Tiger Fund. So we need a way to capture the real estate derivatives market without attacking Tiger Fund.”

Everyone fell silent.

Tiger Fund had built perfect infrastructure for designing real estate derivatives with the Everbed website, their real estate holdings, and major real estate dealers.

Building such infrastructure in a short time would be difficult.

Even investment banks with superior financial resources couldn’t easily enter this situation.

Heavy silence filled the Conference Room.

Then a Young Executive opened his mouth as if frustrated.

“We don’t need to do exactly what Tiger Fund does. Our advantage is our lending channels, isn’t it? We just need to release more mortgage loans.”

“While it’s true that real estate demand has increased with interest rates dropping to the 1% range, there are limits with just prime customers.”

“So we lower the standards. We approve Alt-A, even subprime loans. We can receive dozens of times more fees.”

After the 9/11 attacks, United States interest rates dropped to the 1% range.

So much money was flowing into the real estate Market, and people hoping to purchase homes were overflowing.

But hoping didn’t mean loans were possible.

Customers with prime credit ratings could get loans without problems.

But Alt-A grade customers required strict screening, and the lowest subprime grade customers had loan restrictions.

“That’s too dangerous a concept.”

“It’s not dangerous at all. For Americans, Home is like life itself. Even if they’re poor, mortgage delinquency rates are much lower than other loans because of their instinct to protect their shelter.”

Indeed, mortgage loans had the highest repayment rates.

For Americans, housing was their top life asset, and they would defend it at all costs, even if it meant going into debt.

“Mortgage loans certainly have high repayment rates.”

“And there’s a way to steal the real estate derivatives Market from Tiger Fund.”

“What method?”

“Aggressively create and sell MBS (mortgage-backed securities). Using the Funds secured that way to issue mortgages again, we can theoretically create infinite profits.”

It seemed like an absurd claim, but it wasn’t an impossible plan.

Rather, considering the current Market atmosphere, it sounded like a sufficiently attractive proposal.

“Since there’s no possibility of the real estate Market collapsing, we could start cautiously.”

“Going further, we can create and sell CDOs (collateralized debt obligations). By collecting relatively poor bonds and repackaging them nicely, we can explosively increase profit rates.”

“You’re saying we should package them so Investors believe they’re safe.”

“Exactly. The real estate Market will never collapse. So we’re just repackaging to provide good opportunities for Investors.”

A perpetual motion-like structure.

Loans → securitization → Cash recovery → loans again.

It was a structure that could greatly increase Leverage through fund rotation and short-term borrowing, and a method sufficiently viable in reality.

The repackaging method was also feasible.

By collecting poor bonds and packaging them nicely, using the trust of credit rating agencies and sales networks, they could sell them as if they were high-grade.

“If we package them prettily, we can get high ratings from credit rating agencies.”

“Actually, aren’t credit rating agencies organizations that give us the ratings we want? So regardless of what’s inside, as long as the outside looks pretty, that’s enough.”

At first glance, credit rating agencies might seem to hold the upper hand.

But in reality, investment banks were the customers, and credit rating agencies were closer to shop owners selling Products.

Investment banks paid the fees directly, and investment banks would shop around multiple credit rating agencies to choose the one giving the best ratings.

So credit rating agencies couldn’t go against investment banks’ demands.

They had no choice but to give AAA ratings to CDOs that were rotten inside but pretty outside.

“Hmm, it’s a decent plan. What does everyone think?”

“With mortgages holding the center, it’s a structure that absolutely cannot fail. We must do this!”

“Tiger Fund is trying to exclude us and monopolize fees! We need to show them what results come when we get serious.”

Most gave favorable opinions.

That’s how absolute the faith in real estate assets was in the United States.

Investment banks perceived mortgage loans as geese laying golden eggs.

“Good. Then everyone design various derivatives centered on mortgages directly.”

It was the moment real estate derivatives competition began in earnest.

Including Lehman Brothers, Goldman Sachs, Merrill Lynch, and Morgan Stanley.

All investment banks on Wall Street jumped directly into derivatives design and sales.

***

The presidential election season began in earnest.

Since it was a close race difficult to predict, all media poured out only election-related news daily.

“News about Hana Bank escaping from being a troubled Bank is hard to find.”

“It’s fortunate it’s not becoming an issue. If it became known that they escaped troubled Bank status this quickly, there would inevitably be controversy over the bargain acquisition.”

Song Sang-yeon even sighed with relief as he spoke.

That’s how quickly Hana Bank had escaped troubled Bank status.

It was thanks to mergers and acquisitions with Card companies and selling large quantities of real estate derivatives at United States branches.

“How much has Hana Bank’s value increased now?”

“It’s increased at least twice. Client exodus is no longer occurring either.”

“Not bad.”

“Don’t we need an event to bring back the clients who left? And to increase Bank sales, we should also consider new loan Products.”

I had no intention of forcibly inflating the Bank’s size.

Hana Bank was merely a tool for selling United States real estate derivatives.

Of course, larger scale could bring greater profits, but I didn’t want a situation where debt increased from excessive expansion.

“When trust is restored, customers will naturally return. There’s no need to rush right now.”

“I was too hasty.”

“All Tiger Fund subsidiaries will use Hana Bank as their main Bank. That alone will be enough to increase sales.”

Combined, Tiger Fund subsidiaries exceeded Large Corporations.

Just combining Daehyeon Construction and semiconductor employees exceeded ten thousand, and adding all other subsidiaries could secure tens of thousands of stable customers at once.

And all financial activities of subsidiaries would only be conducted through Hana Bank.

All corporate reserves would be deposited in Hana Bank, and transactions with subcontractors would also have to go through Hana Bank.

With such a structure, there was no need to hastily try to increase sales.

“Just completing that structure would increase Hana Bank’s value several times over.”

“Moreover, since all Tiger Fund Korea Branch Funds will be deposited in Hana Bank, we’ll never fall behind other banks in financial power.”

Hana Bank no longer needed worry.

Just as I was thinking that, Chairman Robertson suddenly called.

[Branch Manager! We have a big problem.]

“What’s wrong?”

[Investment banks are starting to compete in releasing real estate derivatives. They seem upset that we’re monopolizing fees, so they’re desperately churning out Products.]

I could feel urgency in the Chairman’s voice.

But I had somewhat expected this situation, so I accepted it calmly.

“Even if we hadn’t monopolized fees, investment banks would have aggressively created and sold real estate derivatives on their own. The timing just moved up a bit.”

[Then… you were already expecting this reaction?]

“We have Everbed anyway. Our profits won’t decrease significantly, so you don’t need to worry too much.”

[That’s a relief then. Still, I’ll send you Materials on the Products investment banks created. They’re really being aggressive, so you need to check them directly.]

I barely reassured the Chairman and hung up.

Within minutes, related Materials poured in, and I reviewed them with Song Sang-yeon.

“Most are mortgage-related Products. As the Chairman said, United States investment banks really have aggressively released real estate Products.”

“Most of them have very high ratings.”

“On the surface, their creditworthiness looks excellent, and the returns are decent too. Since they’re marketed as having stability as well, many institutions will likely show interest.”

They were excellent products with absolutely no reason not to buy them.

But I felt a strange sense of unease. Clearly there seemed to be nothing wrong on the surface, but something bothered me.

“But could all the investment banks suddenly release products with such high credit ratings? If so, why weren’t there products like this until now?”

“I’m also suspicious of that point. Unless Americans’ credit suddenly improved all at once… they must have pulled some tricks in the credit evaluation process.”

At that moment.

An earsplitting discord reached my ears.

The discord coming from the real estate derivatives created by American investment banks made hives break out all over my body.

“Something is definitely strange. It seems like the investment banks are staging a fraud across all of America.”

“Surely that can’t be the case? They may have played some tricks, but they would have designed it so there wouldn’t be major legal problems. American investment banks are meticulous about such matters.”

“There’s only a fine line between business tactics and fraud. As long as the real estate market keeps running smoothly, even extreme derivatives wouldn’t be a problem.”

For fraud to be established, several conditions were needed.

Among them, the most important condition was that damage had to occur.

But if no damage occurred at all, even if fraud was committed, it wouldn’t be punished or even treated as a problem.

“On the surface, there seems to be no possibility of problems at all. Even though they repackaged low-grade bonds, as long as the real estate market holds up, no damage will occur.”

“The premise itself is wrong. Why do you assume the American real estate market will last forever?”

“These aren’t just any real estate products, but housing mortgage products. In America, not being able to protect your home is the same as giving up your family. No matter how low someone’s credit is, wouldn’t they try to protect their family to the end?”

This was the opinion of the Deputy Branch Manager, who was familiar with American thinking.

It sounded plausible at first glance, but I heard intense discord in his words.

“Before the IT bubble burst, the American market was also optimistic. Everyone thought it would last forever, but the IT bubble collapsed.”

“Do you think the American real estate market will end up the same way? No matter what massive event occurs, it’s hard to even imagine the American housing market collapsing.”

“Actually, if we’re just looking at right now, the Deputy Branch Manager’s opinion is correct. But investment banks are competitively issuing mortgage loans recklessly. Then bubbles will inevitably form.”

Actually, it wasn’t something to worry about right away.

It would take at least 5 years for bubbles to form and then burst.

“Will a situation like the IT bubble occur?”

“An even bigger situation might occur. As the Deputy Branch Manager said, housing has special meaning in America.”

“Then what should we do?”

“There’s no need to rush. We just need to prepare slowly and wait for the bubble to grow sufficiently.”

The shock is doubled when assets believed to be safe collapse.

A market collapse of dimensions incomparable to the IT bubble would surely occur.

Conversely, if we just prepared properly, we could turn the crisis into an opportunity and devour the entire market.

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This chapter was translated by Lunox Team. To support us and help keep this series going, visit our website: LunoxScans.com
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