Why Are Low to Mid Credit Score Individuals Hit Hardest by Financial Crises?…Blue House Policy Chief’s Second Confession

Structure of Finance Series, Part 2: “I, Too, Am Not Free from Responsibility”

“The Core of the Crisis Is Large Capital, the Aftermath Falls on Those with Low to Mid Credit Scores”

“Low Interest for Top Tiers, a Steep Cliff for the Middle...The Center Is Hollow Like a Donut”

“Fintech Has Not Changed the Tendency to Avoid...Data Only Serves as a More Elegant Pretext for Rejection”

“Finance Is Not a Completely Free Market...It Operates as an Institutional Product Under State License”

Kim Yongbum, Policy Chief at the Blue House, criticized the financial structure in which the responsibility and cost of financial crises are distributed asymmetrically. He pointed out, “The catastrophe that shakes the system begins when the risks taken by large capital exceed a critical threshold, but it is those at the bottom—the individuals—who pay the harshest price.”

Policy chief Kim Yongbum is briefing on the results of the emergency economic inspection meeting related to the Middle East situation held that morning at the Blue House Chunuchugwan on the 9th. Photo by Yonhap News Agency

On May 2, in the second installment of his “Structure of Finance” series posted on Facebook, Kim stated, “When we reflect on the aftermath of a financial crisis, we notice strange phenomena.” The previous day, he criticized credit ratings and interest rate structures in an article titled “Why Is Korean Finance So Cruel: The Imperfect Science of Credit Ratings.” On this day, he focused on the structure whereby individuals with low to mid-range credit scores are pushed out of the market following a financial crisis.

He cited the savings bank crisis, the Legoland crisis, the shipbuilding company insolvencies, and losses from equity-linked securities (ELS) and other derivatives, emphasizing that the Korean financial sector is no exception. Kim commented, “The savings bank crisis resulted from reckless real estate project financing (PF) being forced to a halt, and the Legoland crisis was a disaster where the trust in guarantees—once taken for granted—collapsed overnight. Major explosions that paralyze the system are always conceived at the frontlines of capital, within their own sophisticated designs and models.”

However, he clarified that this does not mean individuals are free of responsibility. Kim explained, “There have been times, such as the credit card crisis in the early 2000s, when reckless consumption caused social turmoil. But that was only a localized insolvency, not the core of a catastrophe that could bring down the entire financial system.” He went on to state that individuals, in fact, have been the most diligent and stable foundation—the very bedrock—supporting the enormous financial fortress.

"Those Responsible for the Crisis Survive, While Individuals with Low to Mid Credit Scores Are Turned Away"

In this article, Kim strongly criticized the structure that shifts responsibility onto individuals after financial crises. He said, “Strange things happen once the storm passes. The core entities responsible for the crisis survive under the logic of ‘too big to fail’ or hide behind the pretext of restructuring, while the aftermath is directed at individuals with low to mid credit scores who approach banks with just a loan application in hand.” Those with low to mid credit scores are the first to be turned away under the guise of risk management.

Kim pointed out that this asymmetry is clearly evident in the credit rating and interest rate structure, identifying the lack of a middle ground as a problem. He observed, “Top-tier borrowers can raise funds comfortably at low interest rates, but just below that, there is a steep cliff of high interest rates.” He compared the absence of a middle ground to a “giant donut,” diagnosing that “the market exists at both extremes, but the very middle—where most people should be—is neglected and left unattended.”

Kim further criticized that, while people’s lives and creditworthiness are inherently continuous spectrums, finance does not recognize this continuity. “Just as with height or weight, most people cluster along a gentle curve in the middle, and risk, too, should naturally shift gradually along that trajectory. Yet finance does not acknowledge this rainbow-like continuity—it slices lives with a binary blade of ‘prime’ versus ‘subprime,’ ‘approved’ versus ‘rejected.’”

He went on to say, “The fact that a one-point difference in credit score determines whether someone qualifies for a prime loan or is pushed into the high-interest market is less about statistical science and more about operational convenience. Life’s risks rise gradually, but the answers provided by finance are like a broken ladder, missing all the middle rungs.”

"Neglecting the Middle Segment Is Finance’s Evasion Strategy...An Unprofitable Segment"

He attributed the cutoff in financial supply for low to mid credit score individuals to the “evasion strategy” of financial institutions. It is not due to incompetence, he argued, but rather a thoroughly calculated avoidance. “For banks, the middle segment is an unprofitable zone,” Kim explained. “It is easy and cheap to filter out prime customers with clean data using machines.” Conversely, “the high-interest market, where risk is offset by charging very high rates, has its own profit model.”

However, he said, the middle is different. “It takes significant effort to closely examine whether someone truly intends to repay and to adjust interest rates accordingly. Since they want to manage risk but not incur costs, it is more rational for them to simply avoid this segment altogether.”

He also pointed out the limitations of fintech. “I thought fintech would break this pattern,” Kim said, “but as information has increased, selection may have become sharper, but the fundamental tendency to avoid risk has not changed.” He added, “Data has become not a tool to help people, but a justification to more elegantly refuse them.”

He acknowledged the necessity of the government’s policy-based finance, but also noted its limitations. “Ultimately, the government steps in to provide guarantees and lower interest rates, doing its utmost to fill the gap,” Kim noted. “This is necessary, and it is the reason why finance is not completely delegitimized.” However, he said, “This is only a temporary fix—it does not change the structure itself. The issue lies not in the quantity of supply, but in the very place where supply has stopped.”

"Those Most in Need Cannot Even Pay High Interest...They Lose Options Entirely"

President Lee Jae-myung is speaking at the Senior Presidential Secretary Meeting held at the Blue House on the 30th. April 30, 2026 Yonhap News Agency

Kim reiterated the concern raised by President Lee Jae-myung: “Why do those most in need pay the highest interest rates?” He stressed, “The reality is even worse. They are not just paying high interest—they are deprived of options altogether. They are driven out, unable even to obtain a ticket to enter the market.”

He emphasized that this cannot be seen as a natural outcome of a market economy, nor is it accidental; rather, it is a “meticulously neglected structural contradiction.” “Finance is not a completely free market,” Kim argued. “It operates under government license and with public funding support—it is an institutional product.” He explained that “this current disastrous outcome is also the result of a deliberately designed structure. Risk is continuous, but finance cuts it off mercilessly, and those pushed out beyond the boundary are left to wander outside the market, bearing even higher costs.”

In his second article, Kim also confessed, “I, too, have been at the very center of this system, so I am not free from responsibility. This writing is both a confession and reflection before blaming anyone else.” He concluded, “We need to re-examine the structure we have created. Since it was made by humans, it can be changed.”

This content was produced with the assistance of AI translation services.