The Return of the Ruined Chaebol's Third-Generation Heir - Chapter 61

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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The Regression of a Fallen Chaebol Heir — Episode 061
One morning in October 2007.
“It’s been so hard to see Seon-woo lately.”
At Mother’s words, I stopped mid-scoop of rice and looked up.
“Seon-ah’s been even harder to find, if anything.”
“Seon-ah got motivated seeing her brother get a perfect College Entrance Examination score, so she’s already working hard. She left early this morning to attend study hall.”
The corners of my mouth lifted slightly.
I hadn’t expected Seon-ah to be motivated by it. That was a good thing.
Our household breakfast was meant to be something everyone shared. But lately, both Seon-ah and I had been missing it more often—her because of entrance exam preparations, me for other reasons.
“I’ve been busier since re-enrolling, too. There are lectures to keep up with, and various activities as well.”
I hadn’t told Mother about my Double Life yet. Or perhaps I never would.
She’d only worry, and I didn’t want to burden her with that.
In this life, I simply wanted to be a studious, well-mannered son.
“I understand, of course.”
Mother smiled and ladled soup into my bowl.
“By the way, how’s the company doing these days?”
“The company? It’s going well.”
There was a time when Mother would hesitate if I asked something like that.
She probably thought there was no point discussing business with a young child.
But things were different now.
With my College Entrance Examination scores, university admission to a good school, and military service completed, Mother now recognized me as an adult.
“There are daily calls from China asking if we can borrow more ships, and domestically there are many who want to rent our vessels.”
It was good news.
The Equity Stake restructuring was proceeding smoothly too. I wished we could unwind the circular investment in one stroke, but since it wasn’t easy, we were proceeding step by step.
“I think Status Quo Maintenance would be best while things are good.”
I said this casually as I took another spoonful of rice.
“Status Quo Maintenance?”
“Yes. The atmosphere in American finance isn’t ordinary. I’ve been studying that sector at school lately.”
“I’ve heard about it too. Actually, there’ve been talks at our company about expanding the fleet, but we’ve put that on hold for now.”
As expected.
Choi Dong-su, a senior executive, was by Mother’s side.
He wasn’t the type to push for business expansion, but he was someone who could faithfully apply the brakes when things seemed headed in the wrong direction.
It seemed he’d served Mother well during my absence.
“The scale could grow further, or it might last a long time. I think it’s best to secure dollars as much as possible.”
Mother smiled.
She wouldn’t trust my words completely or follow them blindly. But as a mother, she found it touching that her son had something to say.
That was enough. I’d planted the seed.
“Understood. Thank you for the advice.”
I glanced at the watch on my wrist, thinking this was a good place to stop.
“I’ll excuse myself now.”
“Eat a bit more before you go.”
“I need to leave now to catch the bus. I’ll see you again tomorrow morning.”
“Alright, have a good day.”
I left the house with Mother’s farewell.
Just beyond an alley from the house, a black sedan sat waiting.
I looked around once before getting in.
“You’ve arrived?”
“Sorry. I was running late talking with Mother.”
Jung Tae-sung greeted me as I settled into the car.
“Not at all. I arrived just five minutes ago.”
“Let’s head straight to the Office.”
As the car pulled away, I unfolded the newspaper on the back seat.
The financial section’s headlines were all about the stock market. The domestic market was also groaning under the influence of the American market.
Since Merrill Lynch’s earnings announcement, the market’s atmosphere had shifted noticeably.
“How is SJ Holdings managing?”
At my question, Jung Tae-sung met my eyes in the rearview mirror and opened his mouth.
“As you instructed, we’ve liquidated nearly all risky assets and repositioned the portfolio toward defensive stocks.”
That was a relief.
SJ Holdings had Asset Management specialists Jung Tae-sung had carefully selected, making it easy to deploy the company’s capital efficiently.
“Please contact Shinhwa Welltech and Synapse Robotics as well. Tell them to maintain current operations for the time being. As for raw materials, have them secure what they can in advance.”
“Yes, I’ll convey that message.”
Seoul’s morning landscape streaked past the window.
Commuter traffic was bumper-to-bumper. It was an ordinary October morning, but the newspaper’s headlines were different from yesterday, and tomorrow would differ again from today.

* * *
November 2007.
“Citigroup collapsed too.”
Han Jae-yi spoke up as soon as I entered the Office.
Her eyes were fixed on the Bloomberg Terminal.
A month since Merrill Lynch’s earnings announcement.
Much had changed in that time.
[Dow Jones Industrial Average Falls Day After Day…….]
[S&P 500 Plunges as Financial Stocks Slide]
[Merrill Lynch Just the Beginning — Experts Warn of Larger Institutions at Risk]
The Dow Jones had fallen nearly 10% from its peak, and Wall Street saw losses announced daily. UBS had collapsed, and rumors of a Microsoft crisis were spreading.
The word “Subprime” hadn’t been absent from a single news cycle.
We continued moving according to plan throughout this period.
Danny had completed two of three tranches of staggered purchases in the United States, while Han Jae-yi monitored the market at the Terminal every day.
I kept up my Double Life—attending lectures at school during the day and working at the Office at night.
“How much?”
“11 billion dollars in Subprime-related losses. CEO resignation.”
Eleven billion dollars—over 10 trillion won in Korean currency. After Merrill Lynch, now Citigroup.
The giants of Wall Street were falling one by one.
“How many times this month alone?”
Han Jae-yi muttered to herself.
“Merrill Lynch, Citigroup, UBS…… what’s the total loss across all of them?”
“It’ll be over 30 billion dollars.”
I removed my coat and sat down.
Just a month ago, the market believed that if the Fed cut rates, everything would be resolved.
“What about our position?”
“Credit Default Swap prices keep climbing. Bear Stearns CDS has nearly doubled since a month ago.”
Excitement tinged Han Jae-yi’s voice. When the market only went up, she’d always seemed anxious, tapping at the Terminal with a worried expression.
“This is just the beginning.”
“I know. But…”
Han Jae-yi looked at me.
“Honestly, it’s a bit frightening. It’s unfolding exactly as you predicted.”
I didn’t answer. I understood what she meant by frightening. My predictions coming true meant that something much larger was coming.
Ring-ring-ring—
The phone rang then—the private number I’d given only to Danny. A dedicated hotline of sorts.
“Danny.”
-You seen the situation?
Danny’s voice was weary yet somehow exhilarated.
“Citigroup?”
-Yeah. 11 billion in losses, CEO stepping down. Same pattern as Merrill Lynch.
The sound of keyboard tapping came through the receiver.
-Let me update you on our position. Bear Stearns CDS is up 80% from purchase price, Lehman is at 60%, Merrill Lynch is nearly double.
“What about AIG?”
-Around 40%. Hasn’t really blown yet.
I nodded. It wasn’t time to sell yet. This was only the beginning.
“Hold steady. Do we have capacity for additional purchases?”
-We do. The third tranche of staggered purchases hasn’t been deployed yet.
“Focus on Bear Stearns and Lehman. Especially Lehman.”
-Got it.
Danny paused for a moment.
-……By the way.
“Yeah?”
-Remember that guy from GS who sold us CDS? My old coworker.
The one who used to try to talk Danny out of his strategy.
-He barely contacts me these days. He used to joke constantly about whether I was still doing that crazy stuff.
A wry note entered Danny’s voice.
-Now he can’t laugh anymore, I guess.
“…….”
-Anyway, I’ll keep watching. I’ll contact you if anything comes up.
“Thanks. Good work out there.”
I hung up and turned back to find Han Jae-yi watching me.
“How much profit?”
“Bear Stearns 80%, Lehman 60%, Merrill Lynch nearly double.”
Han Jae-yi’s eyes widened.
“That’s insane. Absolutely insane.”
“This is just the start.”
I gazed at the Terminal screen.
Red numbers covered the display.
“The real collapse comes next year. This is just skirmishing.”
“……How much bigger does it get?”
Instead of answering, I shrugged and took my seat.
I couldn’t tell Han Jae-yi the truth.
That a 158-year-old investment bank would vanish overnight.

* * *
March 2008.
Wall Street in New York, Bear Stearns Headquarters.
Much had changed in the interim. The new year 2008 had arrived, but Wall Street’s mood was dark.
The Subprime Crisis wasn’t easing—it was sinking into deeper mire.
In January, Bank of America staggered under Subprime losses, and global stock markets collapsed in tandem.
In February, Northern Rock Bank in England was nationalized. It was the first time in decades that a bank in a developed nation had been nationalized.
And in March.
Market attention had turned entirely to Bear Stearns.
“What’s happening?”
Deep night, past 3 a.m.
Alan, the chairman of Bear Stearns, had rushed to the office after an urgent call.
The CFO approached him as he entered the building lobby.
The two men walked toward the elevator, talking as they went.
“The cash in our vault has run out.”
Alan’s face hardened.
Just yesterday morning, Bear Stearns’ vault had contained 17 billion dollars in cash.
When reporters swarmed him at the entrance, he’d said confidently: with 17 billion dollars, we would survive.
That was less than a day ago.
“The Repo market is refusing to lend to us.”
Repo was the lifeblood of an investment bank.
Investment banks don’t operate with their own money. Each night they pledge their holdings of Bonds as collateral and borrow cash from major banks. The next morning they repay it with interest.
This cycle happened daily—it was the routine of investment banking.
But early this morning.
Every investor in the market had, as if by agreement, notified Bear Stearns they would not lend money.
“They say they won’t accept Mortgage-Backed Securities anymore. They’re asking for other collateral.”
Most of the hundreds of billions in Bonds Bear Stearns held were connected to Subprime mortgages.
Assets that had been treated like gold until last year were now treated as garbage no one would touch.
Refusing to accept them as collateral meant Bear Stearns’ assets were no longer trusted.
The chairman, stepping into the elevator, let out a long sigh.
“Let’s go up and talk.”
Ding—
The elevator stopped at the executive floor.
The moment the doors opened, a frantic man rushed toward him. The Chief Operating Officer.
“Alan, disaster. GS just declared Novation on our products.”
Alan’s footsteps halted.
Novation was essentially a contract reassignment.
Where a contract originally made between A and B would have B leave and C step in instead.
GS declaring Novation meant they were exiting every Derivatives contract they’d made with Bear Stearns.
Wall Street’s largest investment bank had publicly abandoned Bear Stearns.
The moment this news spread to the market, the remaining banks would inevitably follow.
“Let’s go inside.”
Alan tried to maintain composure.
As they entered his office, the CFO spoke up.
“When the market opens at 9 a.m., there will be settlement requests worth 6 billion dollars. If we can’t secure the cash by 9……”
Default—in other words, bankruptcy.
Clients’ assets would be frozen, and shockwaves would ripple through the global financial system.
He himself might spend the rest of his life in court and prison.
And over 10,000 employees would find themselves on the street overnight.
“Hah……”
Alan exhaled slowly and picked up the phone on his desk. He found a number he really didn’t want to call and pressed it.
Close to 4 a.m.
But before the call tone had rung more than a few times, the other party answered.
-Alan.
“Jamie, it’s me.”
The voice on the other end was composed.
Jamie Dimon.
CEO of the global investment bank JP Morgan.
Bear Stearns’ longtime rival.
-What brings you to call at this hour?
He surely knew the situation. He was just asking out of protocol. Alan swallowed his pride and spoke.
“Jamie, we can’t open doors tomorrow. We’re out of cash.”
The sound of decades-built pride crumbling.
On Wall Street, saying such a thing to a competitor was equivalent to surrendering.
But this wasn’t a moment to be concerned with pride.
For a long while, nothing but silence came through the receiver.
Just as Alan was about to speak again—
-Give me 30 minutes. I’ll call you back.
Click.
The line went dead.
Alan set down the receiver and looked at his two subordinates.
A single nod conveyed his message to wait.
Tick. Tick.
Only the ticking of the wall clock filled the room.
One minute felt like an hour.
Five minutes passed, then ten.
Ring-ring-ring—
The phone rang.
Alan immediately picked up the receiver.
“Jamie.”
-Alan, I’ve concluded talks with the Federal Reserve Bank of New York.
A brief silence fell.
-This morning, we at JPM and the Fed will provide emergency liquidity.
Alan clenched his fist without thinking.
He squeezed his eyes shut.
“……Thank you, Jamie.”
-Get things under control first. We’ll talk again this afternoon.
The line disconnected.
Alan set down the receiver and exhaled a long breath.
“It’s done. We’ve secured funding.”
Relief washed over the CFO and Chief Operating Officer’s faces.
Bear Stearns, with its 85-year history, had nearly collapsed tonight but lived to see another day. A faint smile crossed their faces.

* * *
Hours later, the same morning.
Bear Stearns Trading Floor.
Employees who’d arrived early clustered in small groups before the television.
The chairman of the Federal Reserve Bank of New York was speaking on screen.
[We at the Federal Reserve Bank of New York and JPM have decided to provide emergency liquidity to Bear Stearns. The size is…….]
“We’re saved!”
A cheer erupted.
The Fed and JP Morgan had saved them.
An interview with Bear Stearns’ chairman followed. Liquidity had stabilized, and normal operations could resume.
“Everyone, you all saw the news?”
A manager entered the floor and spoke.
“We’re stable now, so let’s be ready for when the market opens. Everyone, take your seats.”
Employees who’d come in worried about the future took their seats with noticeably lighter expressions.
9 a.m.
The market opened.
Beep-beep—
Beep-beep—
The moment the market opened, alert sounds began blaring throughout the Office.
“What’s happening?”
The manager stood up and asked.
“Our stock is cratering right now!”
“Opening price was 56 dollars and it’s already dropped to 48!”
Employees briefed the situation in turn.
The chairman had gone on air saying they were safe, but the market didn’t believe it.
“The Fed stepping in directly looks like a losing move. The market seems to think our company is already finished.”
Fear flooded across the employees’ faces.
It took less than ten minutes for hope to transform into terror. Then one employee suddenly jumped to his feet and shouted—
“Our systems are down! Money is flowing out of our accounts!”
Bank Run.
Customers had begun withdrawing their funds.
The floor became chaos in an instant.

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