Employees at state-funded Taiwan Asset Management Co (TAMC, 台灣金聯資產管理) might just have proven Control Yuan President Wang Chien-shien (王建煊) wrong when he said in December that many of the nation’s 200,000 civil servants are incompetent “idiots.”
Several of the company’s asset managers — including chairman Chen Song-chu (陳松柱), who was dismissed on Tuesday — could have earned kudos after reporting earnings of nearly NT$800 million (US$25.2 million) from stock investments for last year if those funds had ended up in government coffers. However, Chen distributed 10 percent of the stock earnings, or NT$77.44 million, in the form of benefits among the managers, without endorsement from major shareholders, which include 30 private and state-owned domestic banks. This shows the managers were the victims of their own cleverness.
This “inappropriate” reward should be taken seriously by authorities and investigated as embezzlement or corruption because it was incorrect for Chen to argue that the company used no state funds in reaping the investment return. Furthermore, Chen defended the bonuses as being in line with market rules, but several private-sector fund managers said they have never received more than 1 percent commission from any investment.
TAMC was founded in May 2001 with a working capital of NT$17.6 billion by 30 domestic banks and three bill finance companies. Its goal at the time was to help reduce the domestic banking sector’s non-performing loan ratio at its peak of more than 8 percent then, which improved to 1.13 percent in January.
The government’s policy at the time was to extend roll-over loans to ill-performing businesses following the 1997 Asian financial crisis. To solve the sector’s bad-loan problem, along with bailing out many banks, the government allocated hundreds of billions of taxpayer dollars for the Financial Restructuring Fund (金融重建基金), even though taxpayers were not at fault for the nation’s financial meltdown.
While banks often recovered a meager NT$0.1 to NT$0.3 for each NT$1 on foreclosed loans, authorities realized that the bad loan restructuring business could be quite lucrative. Experienced asset managers, who acquired bad loans at a discount, could find ways to repackage, restructure and resell the bad loans at a better margin.
It was against such a backdrop that the domestic banking sector joined forces and called for the establishment of TAMC to minimize bank losses from bad loans.
TAMC is a by-product of the government’s bailout plan to improve the financial sector’s health with taxpayers’ money. Therefore, no TAMC employees should be receiving bonuses when the nation’s taxpayers remain the silent victims.
Dismissing Chen is the right thing to do, but let’s hope it doesn’t backfire and discourage civil servants from thinking creatively to maximize returns for government coffers.
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