'Lee Jae-myung Put' Sparks Fears of Market Bubble and Moral Hazard

The term 'Lee Jae-myung Put' is currently circulating in the stock market. It refers to the intervention of former US Federal Reserve Chairman Ben Bernanke in financial markets during the 2008 financial crisis, similar to the 'Bernanke Put.' The 'Lee Jae-myung Put' signifies investors' expectations that the Lee Jae-myung administration will not allow stock prices to fall. A put option is a derivative product that hedges against losses when stock prices fall. The term carries a critical view that the central bank will act as a rescuer during stock market downturns, much like a put option, which can lead investors to take excessive risks, creating stock market bubbles and endangering the national economy. The biggest problem with the 'Lee Jae-myung Put' or 'Bernanke Put' is the exacerbation of investor moral hazard. If investors rely solely on the government or central bank and take on excessive risks, it can create a stock market bubble and put the national economy in peril.

The Lee Jae-myung administration recently intervened in the performance bonus negotiations between Samsung Electronics' management and labor, leading to a tentative agreement. During this process, the President repeatedly stated that the invocation of the emergency adjustment right would be unavoidable in case of a strike. The Prime Minister mentioned that economic damages could reach up to 100 trillion won. While semiconductors are a key national strategic industry, there is doubt as to whether a Samsung Electronics strike meets the conditions for invoking the emergency adjustment right, such as 'a situation where there is an imminent risk of significantly harming the national economy or jeopardizing the daily lives of the people.' The '100 trillion won in damages' mentioned by the Prime Minister may also be exaggerated. Academics and market experts had estimated damages of 20-30 trillion won, or about 1 trillion won per day. Even if such damages were to materialize, Samsung Electronics' operating profit forecast for this year is unlikely to be significantly reduced. It remains one of the world's top-performing companies. Some also mention damages due to disruptions in the global semiconductor supply chain, but there is little possibility of a company emerging to replace South Korea's supply of High Bandwidth Memory (HBM) and DRAM in the immediate future.

The government and the ruling party may have been calculating political gains and losses ahead of local elections. They might have judged that condoning a strike that burdens stock prices and is disliked by shareholders would be disadvantageous in the local elections. The number of individual retail investors in South Korea surged from 5.61 million in 2017 to 14.42 million by the end of 2025, and their proportion of the total electorate has also increased from 13.2% in the 2017 presidential election to 32.5% in the 2025 presidential election. In other words, one in every three voters is now a stock investor. The emergency adjustment right likely served as a pressure tactic to drive labor and management to reach an agreement. If invoking the emergency adjustment right is justified because semiconductors are a core industry, it could set a bad precedent for strikes in other key industries such as automobiles, energy, and shipbuilding in the future. The emergency adjustment right, introduced in 1963, has been invoked only four times in over 60 years, indicating that past governments have approached it with caution. Past governments discussed ways to protect workers' right to strike from excessive compensation claims by companies and designated 'respect for labor' as a national policy objective. Reviewing the invocation of the emergency adjustment right just one year after its establishment is historically questionable.

Regardless of any clarification from the presidential office, the President's remarks were disappointing in the context of discussions about distributing excess profits from semiconductors becoming a focal point following Samsung Electronics' union's performance bonus demands. It is regrettable that the President did not calmly explain the intent of his remarks to the public and constructively guide social discourse. In their haste to deflect responsibility for stock price declines, the President and the presidential office may have inadvertently stifled the expansion of social discussions on the distribution of excess profits and surplus tax revenue. This is interpreted as a result of the government being overly conscious of stock prices and shareholders.

Recently, a commotion arose due to a social media post by the Senior Secretary to the President for Economic Affairs regarding a 'national dividend.' Reports indicated that the post caused a stock market crash. The President clarified that the message was about reviewing a plan to distribute surplus tax revenue from AI excess profits as a national dividend, and that malicious fake news was being spread. The presidential office also distanced itself, stating the claims were personal opinions unrelated to internal discussions. The Senior Secretary had previously proposed the national dividend plan.

On the 20th, when the Samsung Electronics labor-management negotiations reached a tentative agreement, Yeo Myung-gu, Head of the DS Business Division People Team; Kim Young-hoon, Minister of Employment and Labor; and Choi Seung-ho, Co-Chair of the Samsung Electronics Union Joint Struggle Headquarters, shook hands at the Gyeonggi Regional Employment and Labor Office in Jangan-gu, Suwon-si, Gyeonggi Province.