Unlike in Europe, subprime wasn’t the issue. South Korean holding of toxic US mortgage securities amounted to only $850 million.8 The problem was not on the asset, but on the funding, side of the balance sheet. Since the early 2000s, Seoul had promoted itself as a regional financial hub for Northeast Asia. It had liberalized currency and capital flows. A large part of South Korean banking was owned by foreign investors, and Korea’s banks had shifted to the unstable new model of wholesale funding, borrowing short term on global dollar markets to invest long term at higher interest rates in
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