Empire of Gold - 3, 2, 1, Go!
“The Tonight Show, ladies and gentlemen. Welcome!” At the producer’s cue, Yoo Jae-won stepped forward in a crisp suit, radiating confidence as he delivered the opening greeting.
“I’m Conan O’Brien. Tonight we’re broadcasting live, so the pressure is on—but as long as I do my job right, we’ll be fine. One thing I can promise you: everyone watching tonight’s show is in for a treat!”
With his signature fiery red hair, pale complexion, and razor-sharp wit, Conan O’Brien launched into the opening of The Tonight Show.
“Our guest tonight is someone truly special. This is only his second appearance, yet the circumstances are completely different from last time. In the time since, he seems to have unlocked an extraordinary potential—now wielding what some might call forbidden magic.”
The host’s usual one- or two-sentence introduction stretched into a lengthy explanation.
“That magic is called foresight. A year ago, he predicted the crisis we’re facing now. Not only did he bet against the market, he even made a film to warn the public in the clearest way possible.”
By this point, no one could mistake who the guest was. Yet Conan’s opening monologue continued.
“What was the reaction back then?”
At Conan’s question, the audience erupted with overlapping voices. The twenty or so spectators were seasoned reactors. Among them were three people who had suffered losses from subprime mortgages. Two of them had seen Yoo Jae-won’s film and his massive put-option bets, taken preemptive action, and minimized their damage. The third had bought a home for actual residence; while the rising payments were burdensome, they still had savings and had avoided foreclosure.
“Haha, from your reactions I can tell there’s no need to explain further. Let’s bring him out. Tonight’s special guest—Chairman Yoo Jae-won of ID Group!”
As Conan spoke, Yoo Jae-won appeared on stage. The roar of the crowd was on an entirely different level from when he had promoted The Pacific. Waiting backstage, he nodded at Conan’s steady hosting. The Tonight Show had become NBC’s flagship talk show. After the host change, ratings had dipped as expected, but trusting in Conan’s talent had paid off. Viewership was now three percent higher than before, making it the most popular talk show in North America. That was why Yoo Jae-won had chosen The Tonight Show without hesitation for his first television appearance in a long while.
“There are many things I’d like to ask the Chairman. I’m sure the audience feels the same. So I’ll ask on everyone’s behalf. How much did you make?”
Even for Conan, delivering such a blunt question with an innocent expression was slightly startling. Still, treating guests with casual familiarity while staying within bounds was part of a talk-show host’s charm.
“Is it a secret?”
“No. There’s no reason I can’t say it. Anyone who needs to know already does. To be precise, it’s $243.75 billion.”
Thud! The moment the words left his mouth, it felt as though a massive iron weight had dropped onto the stage. People had guessed the sum was enormous, but hearing the exact figure from the man himself carried a different weight.
“You’ve rewritten Wall Street history! How does it feel to become the world’s richest man?”
Conan’s face was filled with anticipation. With such a concrete number already out, the reaction after the broadcast was easy to predict. He wanted to pour fuel on the fire and watch it blaze.
“Not particularly.”
Yoo Jae-won poured cold water on Conan’s expectations.
“I’ve been the world’s richest man for over ten years already. Besides, making money from put options isn’t exactly a pleasant feeling. And the profits from my puts are still sitting in the account—the settlement hasn’t even come through yet.”
Lehman Brothers, which should have paid out roughly $160 billion, had gone bankrupt. AIG and Citibank were pleading poverty. Each owed him around $40 billion, yet they insisted that paying now would ruin them. In truth, both were already in default. A company’s default meant failing to repay its debts, and missing the October 31st settlement deadline itself constituted default. However, the fallout from AIG and Citibank’s defaults would be on a completely different scale from Lehman’s. Lehman’s investors had at least understood the risk of principal loss. The aftershocks of their CDO and derivative losses ended with investors going bankrupt. Banks and insurers, by contrast, wielded far greater influence over ordinary citizens. ID Group itself kept deposits in banks. Until recently, Citibank had been considered solid; many companies used it as their primary bank. If Citibank collapsed, those companies would collapse with it. AIG was no different. Its default would bankrupt countless policyholders. Given America’s exorbitant medical costs, the ripple effect might even surpass that of the banks. That was why Yoo Jae-won’s ID Investment account held only the right to receive $240 billion—none of the cash had actually arrived.
“On the other hand, as you all know, no one can escape the effects of this subprime crisis. Everyone here, and everyone watching at home, will feel the negative impact. I’m no exception.”
“You’re affected as well, Chairman?”
“Of course. I run many companies, and IT product sales are especially sensitive to economic conditions. From this winter onward, a drop in revenue is inevitable.”
The U.S.-originated financial crisis was spreading worldwide, and ID Group’s sales were already declining sharply. Pre-orders for smartphones, for instance, had plummeted since November.
“Then would you have felt happy if you’d made the same amount with call options?”
Making $240 billion with call options would mean the exact opposite situation. The Dow and Nasdaq would be soaring, and housing prices would be doubling overnight to produce similar returns.
“Wouldn’t you?”
Conan asked cautiously, imagining that scenario.
“Not at all.”
Yoo Jae-won drove the point home.
“Not at all?”
“No. Rising stock and housing prices might seem good for everyone, but some people suffer far more in that environment—those who rent because they can’t afford to buy. For low-income households, the damage would be even more devastating.”
Income inequality had been a problem in America since the Clinton era. Thanks to Yoo Jae-won, the IMF’s push for labor-market flexibility had been scrapped in Korea, sparing the country the “880,000-won generation” phenomenon. Korea was no utopia, and employment and income gaps remained serious, but they were nowhere near America’s level. On top of that, the crushing cost of healthcare weighed heavily on Americans. If the same fortune had been made through call options, housing prices and rents would have skyrocketed, forcing the middle class and below to spend half their income on shelter.
“Fundamentally, generating astronomical financial returns from the housing market itself is abnormal. Food, clothing, and shelter—the three essentials for living as a human being. Economically, it’s the largest market of all. It naturally attracts massive investment and fierce competition. But once devilish inventions like subprime loans and CDOs appeared, the problems exploded. A huge bubble distorted the market, and we ended up with the catastrophe we see today.”
Yoo Jae-won voiced his strong disapproval of derivative products based on subprime mortgages, even using the phrase “devil’s inventions,” which he rarely employed.
“It was obvious to me how this would end, yet no one seemed to find it strange. I placed those put options to make the warning about CDOs and related derivatives unmistakably clear—and, as expected, the worst-case scenario arrived.”
Yoo Jae-won displayed a demeanor completely unlike the typical American style. Humility meant little in the U.S.; even mainstream hip-hop glorified wealth to avoid being dismissed. A Wall Street investor who had struck it rich with put options would normally boast about their foresight. Yoo Jae-won simply showed the attitude he had learned growing up. No one in the studio dismissed him for it, and neither did the viewers watching at home. The words that followed were plain, yet carried an irreplaceable weight.
“For me, the sooner this subprime crisis and the housing-market turmoil subside, the better. That’s why I’ve decided to devote one hundred percent of the profits from these put options to resolving the financial crisis. It’s the only way to fix the situation.”
“One hundred percent? All $240 billion? Wait—before that, it sounds like you already have a solution to this crisis, Chairman?”
Conan O’Brien raised his voice in his signature exaggerated tone, yet it felt entirely natural. The financial crisis was rapidly spreading through American society. It wasn’t limited to astronomical losses at big banks and investment firms; it was hitting ordinary people as well. Jobs—quality jobs—were disappearing fast. Lehman Brothers alone, despite its catastrophic failure, had provided thousands of premium positions. Executives earned millions in base salary plus performance bonuses in the tens of millions. Even ordinary office staff received over $100,000 a year. Those jobs had vanished overnight. And it wasn’t only Lehman. Countless companies had done business with them, borrowing investment funds to operate; when the money dried up, many went under. As these failures accumulated, employment indicators plummeted. The housing-market collapse was bleeding into the real economy.
“The root of this crisis lies in the housing market.”
Yoo Jae-won identified the housing market as both the cause and the place for a solution. America’s housing market, once valued at up to $4 trillion, had reportedly crashed to the low $3 trillion range—a roughly 25 percent drop from the peak, with no end in sight. The collapse was hammering the financial sector, which in turn battered the private sector, triggering further housing-price declines. It was a vicious cycle, and he intended to break it in one stroke.
“To that end, I will use the entire profit from these put options to purchase mortgage-backed securities.”
Some audience members tilted their heads. The measure seemed almost too simple coming from someone of Yoo Jae-won’s stature. MBS referred to mortgage-backed securities.
“Through rigorous filtering, I will also restructure interest rates and repayment schedules to prevent sound households from being destroyed by the crisis.”
The same audience members who had looked skeptical now stared with mouths agape.
“All $240 billion?”
“Yes. I’ve already acquired every mortgage-backed security once held by Lehman Brothers and am currently in negotiations with AIG and Citibank.”
One piece of Yoo Jae-won’s grand plan had been revealed. Had it been possible to bring the full $240 billion in cash into ID Group’s operating account, he wouldn’t have needed to do this. But the only assets worth acquiring at present were the indiscriminately issued mortgage securities. Taking those securities and issuing margin calls would put him on the same level as the reckless banks. Therefore, he had decided to become a major player in the housing market himself.
“However, this will not apply to those who obtained loans by falsifying personal information or used subprime mortgages for speculation. As everyone knows, credit-rating agencies manipulated the creditworthiness of mortgage securities and flooded the market with them, deepening the current chaos. But ID Group possesses proprietary technology that allows us to identify and separate the bad loans.”
Declaring that he would spend the entire $240 billion on acquiring mortgage securities was something only Yoo Jae-won could say. At the same time, experts watching the broadcast from home slapped their knees. It was a viable solution. As the U.S. housing market had shrunk, the real value of mortgage securities had plummeted, and subprime mortgages now accounted for roughly the low $2 trillion range. In this environment, $240 billion—more than one-tenth of outstanding housing loans—could single-handedly halt the domino-like collapse of the housing market.
“But is it possible? That… filtering process. It sounds incredibly difficult just hearing about it.”
He was right. The key to filtering was accurately separating the hopelessly mixed mortgage securities by credit quality. Without that step, blindly acquiring the bonds would turn Yoo Jae-won into the next Lehman Brothers.
“It is possible. Because we have AI Gold.”
AI Gold—that was Yoo Jae-won’s trump card.