Re: Ripplewood Holdings (stems from Chi. Tribune on Enron)

["Charles Jannuzi" <jannuzi@xxxxxxxxxxxxxxxxxxxxxxxxx>]

Ripplewood Pt. 3

And as things become totally bizarre and muddled (mostly because Koizumi
deregulation and liberalization  are going to have immediate postive
effects), we find Ripplewood/Shinsei and its good friends, Goldman Sachs,
mixed up in it all.  A lot of it, by the way, has to do with what is and
what is not a 'bad' loan and what is and what is not an acceptable capital
adequacy ratios. Do credit unions and savings and loans really have to
operate at international standards?

http://www.weeklypost.com/011119/011119a.htm

The Weekly Post Special 1:
Premier Koizumi Seems to be Failing in Reviving Japanese Economy



Japan's Financial Services Agency (FSA) and the Bank of Japan (BOJ) appear
to be concealing the fact that a major Japanese bank is in serious financial
trouble. The bank is in an alarming situation.

The FSA and BOJ do not have any concrete plan to deal with the possibility
of a run on the bank by depositors.

Even worse, the close cooperation that existed between the Prime Minister's
Office, the FSA Minister and FSA executives in handling the nation's
financial problems has started to disintegrate. The three coalition
government parties who have been deciding Japan's financial policies are now
fighting with one another.

The major reason for this infighting stems from Prime Minister Koizumi's
failure to set goals and policies for resuscitating Japan's ailing economy.
Staff  members from government bodies have been swayed by their own
differences in opinions as well as by the suggestions of scholars.

Another matter is a sex scandal involving a high-ranking FSA official, which
seems to have been spread by the governing Liberal Democratic Party (LDP).
The aim of the LDP's covert scandal plot seems to be to blame the
mishandling
of financial problems on the FSA Minister and then have him dismissed.

The government and LDP are blaming each other for the grave economic
problems facing Japan. This is not a proper response to the request for
financial stability coming from the international financial community.

1. Scandal

 In the middle of November, bank stocks were sold off heavily
 and the prices of Asahi Bank and Daiwa Bank stock fell below
  the 100-yen benchmark. Japan's financial crisis worsened.

Under such circumstances, a memorandum was issued by a
central organ of the governing LDP. The memorandum leaked
 information on a paid date between a high-ranking official of
the FSA and a woman of the Ministry of Finance. The affair
allegedly took place when they were working for the Japanese
government in the US.

The memorandum says, "If they used the discretionary fund to pay for their
trysts, it would be serious."

The memorandum was aiming at eliminating the official in question.

The FSA has conducting a special inspection of major banks in order to
complete the bailout of non-performing loans that those banks held. A
bailout involves a decision on what corporations should go bankrupt. The
corporations in question are in the construction, real estate and retail
industries.

If one major corporation files for bankruptcy, all related companies must go
bankrupt as well. If this happens, it will push up unemployment.

The high-ranking official involved in the scandal (call him Mr. A for
convenience) has been in a position to lead decisions on the issue. The
Weekly Post has found an interesting fact about the scandal. In the second
week of November, the FSA, which had been busy dealing with the sharp drop
in banking stock prices and a special inspection of major banks, received
three phone calls.

The three calls were made by the Prime Minister's Office, LDP's Secretary
General's Office and National LDP Headquarter Office. All three offices made
the same inquiries about Mr. A's behavior while he was working in the US."

The memorandum was found to reflect such movements by the Prime Minister's
and LDP offices.

2. Push to Make FSA Director Resign

Within the FSA, a conflict between Hakuo Yanagisawa, the
Minister of Financial Affairs, and Akiharu Mori, the FSA Director
General is surfacing.

Before the conflict, Mr. Yanagisawa and Mr. Mori had once
been allied in a fierce fight against the policies of Heizo
Takenaka, the Minister of Economic and Financial Policy. Mr.
Takenaka's plan was to accelerate the bailout of a huge
amount of bad loans held by major banks. They claimed,
"Given the severe recession in Japan, if we force the bailout of
bad loans, the economy will fall into a panic."

Prime Minister Koizumi had not been able to make any
decision on the issue. His indecisiveness made Japan's
financial problems worse.

Pushed by aggressive movements by foreign hedge funds, he had to instruct
the FSA to conduct a special inspection of the major banks. This meant the
defeat of the alliance between Mr. Yanagisawa and Mr. Mori. That triggered
the LDP to move toward removing Mr. Mori from the position of FSA Director
General.

Then, it related to the scandal memorandum. One source of the Prime Minister
Office said, "Mr. Yanagisawa and Mr. Mori may have to be responsible for the
deepening confusion in the financial policy of the Administration. However,
if Mr. Koizumi dismisses Mr. Yanagisawa, he will have to dissolve his
cabinet. He must avoid this for now. He cannot replace Mr. Yanagisawa, but
he has to do something. Then, the scandal with the high-ranking official of
the FSA surfaced. Prime Minister Koizumi can use the scandal to force Mr.
Mori to resign."

In other words, Mr. Koizumi can have Mr. Yanagisawa stay with his cabinet by
making Mr. Mori a scapegoat.

The FSA at the same time intensified its inspection of local credit unions.
The inspection is forcing many medium- and small-size financial institutions
into bankruptcy. Those financial institutions strongly support the LDP
ranking members. Strong criticism about the FSA is rising among LDP members.

One powerful LDP ranking member who used to be in a ministerial position
said in outrage, "The FSA saved major banks using taxpayer money. However,
the agency is punishing medium- and small-size financial institutions and
letting them go bankrupt. The Agency's policy is seriously damaging the
local economy,

"At the same time, the FSA did not help financially troubled credit unions
connected to North and South Korea and let them go bankrupt. The LDP ranking
members who have interests in those Korean financial institutions in Japan
were outraged with what the FSA had done. They are putting pressure on Mr.
Koizumi to dismiss Mr. Mori."

Financial institutions related to North and South Korea such as Tokyo Shogin
or Korean Bank Kinki in Japan are now under investigation by the police
department and prosecution offices. Some of the executives have already been
arrested for fraud. In the case of the Korea Bank Group, more than one
trillion yen (approx. $8.3 billion) in taxpayer money will have to be used
to save them. The investigation is considered to be too late.

3. A Bank in Crisis

 Many depositors of one financially troubled bank (it cannot be
 identified due to the sensitivity of the information) rushed to
 the bank to withdraw their savings. This could be equivalent
 to a run on the bank.

One stock dealer from a major security house said, "The crisis
of the bank was caused by a rumor that one major
construction company client of the bank would file for bankruptcy. The
construction company is one of the ones that
the FSA is going to allow to go bankrupt. If the company goes bankrupt, it
will lead the main bank into bankruptcy as well.
Stocks related to the bank were sold off."

On November 12, the news reached the depositors and many of them rushed to
the bank to withdraw their savings. The heads and staff of all branch
offices were busy taking care of the depositors who made withdrawals.

The depositors' rush continued the next day, however, it had calmed down.
All branches' of the bank are on emergency alert.

The information about the bank's crisis seemed to have been disseminated by
some
foreign investment banks in Tokyo. It was reported that the Japan Security
Exchange
Committee embarked on an investigation of the possible case of spreading
fraudulent
information.

4. Prime Minister's Lists of Bankruptcy

When FSA started conducting a special inspection, it instructed
banks to make lists of their troubled clients.

Prime Minister Koizumi is reportedly deciding what companies
on the financially troubled company lists should be bailed out.
Mr. Koizumi seems to misunderstand his structural reform plan
and is enjoying using his power.

Already, it has been leaked that the Prime Minister's Office
would let two construction companies and one real estate firm go bankrupt.

If Prime Minister Koizumi is trying to keep the promise that he made to the
US
government, it is just pathetic.

If he promotes the bailout of bad loans, it will only profit US financial
institutions.

One symbolic proof of this fact was the announcement by Asahi Bank that it
would tie in
with Goldman Sachs in bailing out the bad loans. Goldman Sachs provided
consulting
services for the acquisition of Japan Long-Term Credit Bank by Ripplewood.
This time,
Goldman Sachs will have a good business opportunity for selling the bad
loans that Asahi
Bank holds.

If Prime Minister Koizumi decides what companies will go bankrupt, the US
financial
institutions will have a chance to make additional profits if they are
involved in the
mergers and acquisitions of them.

It will show that the Japanese financial crisis will only end by allowing
troubled Japanese
corporations to go bankrupt and sell them to US corporations.

5. Executive in Alleged Scandal Defends Himself

                      Prime Minister Koizumi and financial authorities of
the
                      Japanese government have not found effective policies
for
                      leading the Japanese economy out of its dark tunnel.
An
                      incessant series of crises has hit them harshly. They
are trying
                      to blame others and cause internal conflicts.

                      These types of conflicts are often seen in the
internal
                      struggles of insane religious groups or extreme
leftist groups.

Mr. A, a high-ranking FSA official who was trapped in a sex scandal, was
blamed for
failures of government financial policy. He seems to be a scapegoat.

The Weekly Post interviewed this high-ranking FSA official.

TWP: Is what is written in the memorandum issued by the LDP the truth?

Mr. A, an FSA executive: I know the woman in the memorandum. She used to
work for
me at the Finance Ministry. My stay in the US and where she was working in
the US as
indicated in the memo are correct. However, I have never had sexual
relations with her. I
invited her to our home to meet my family. I treated other female workers
sent by the
Finance Ministry in the same way.

I am far older than she. It is totally beyond anybody's imagination that I
had such a
relationship with her.

TWP: The memorandum says that it would be very serious if the discretionary
fund of
the ministry has been used by you for dating. Did this occur?

FSA executive: I must make it clear that my relationship with her was only
professional.
No one can use discretionary funds other than personnel of the Foreign
Ministry in
foreign countries.

TWP: Your alleged sexual relationship with her has been reported to the
Prime Minister's
Office and the LDP office.

FSA executive: This is just unbelievable. Even if there was a political
plot, the fact that
she and I were working in the US at the same time was known to very few
people at the
Finance Ministry. The LDP politician could not have made up such a story.

TWP: The scandal broke when the FSA started its special inspection.

FSA executive: There had to be various political plots since our job was
related to
deciding on the survival of ailing financial institutions and corporations.

TWP: Was there any possibility that you were used as part of a plot to get
the FSA
Director General fired?

FSA executive: If this is so, it would be unbearable for me as a public
servant.

The reply of Mr. A, the high-ranking FSA official in the question, seemed to
symbolize
the nature of the prolonged Japanese financial problems.

Prime Minister Koizumi has made very few references to the ailing economy.
Professor
Masao Oka of Musashi University said, "The Koizumi Administration doesn't
understand
that financial policy must be a part of national policy. The FSA has never
set forth a clear
policy for bailing out the enormous amount of bad loans that banks hold.
News media
are continuously making the problem an issue and rumors of bad events spread
among
the nation, which leads them to have more fear,

"The government seems to be following a policy that lets business
corporations go
bankrupt if the loans made for them become bad loans. This policy will only
make fewer
Japanese corporations able to survive and shrink the scale of Japanese
economy,

"The nation is unclear what direction Prime Minister Koizumi and Economic
and Fiscal
Policy Minister Heizo Takena want to lead the Japanese economy in. Without
proper
financial administration and a system for watching financial markets, it
will be difficult for
them to protect Japan's financial system."

Prime Minister Koizumi is trying to doge blame for his inability to deal
with the financial
crisis. The stability of Japan's financial system will not be established by
US government
pressure. Prime Minister Koizumi's problem solving efforts seem to be aimed
at bailing
out the bad debts of Japanese corporations by selling them to US businesses.

---------------------------------------------

Posted by Charles Jannuzi