Since the early 1980, well over 90 countries have experienced systematic bank insolvencies. This paper reviews and evaluates the public fund management developed and implemented by the Korean government in response to the  financial crisis of the end of 1997. It is inevitable that the Korean government raised the public funds to clean up bad loans of financial institutions and injected them into the ailing financial institutions. However it is controversial how proper the magnitude of the public funds use is and how much effective it is.

The Korean government injected 160 Korean trillion won of public funds to ensure financial stability and public confidence in the financial sector. The government determined to raise the 64 Korean trillion won of public funds at the first stage of financial restructuring. However, it turned out that 110 Korean trillion won needed to be injected. At the second stage, an additional 50 Korean trillion won were injected. There still exists an enormous amount of potential non-performing loans in the financial sector.

The government published the public funds management white paper twice in 2000 and 2001.  Recently Special Investigation by the Board of Audit and Inspection (BAI) revealed some misuse case of public funds. Still it leaves much to be examined and revealed. This paper contains the objective mid-term evaluation and economic analysis of public funds management, including proper magnitude, evolution of resolution process and asset disposition, maintenance and supervision of public funds, cost effectiveness, equitable treatment, collection and tax burden of public fund injection.

Maintaining public trust is a key objective for financial authority. The moral hazard in financial supervisory authorities, financial institutions, ailed firms and even in depositors are suspected to be widespread. The government needed to conduct a fair and consistent investigative process of this matter.