When Banks and Corporations Collaborate

I am repeating myself time and again. Well, I have heard it said that repetition is the mother of skill. One can see the same things from different sources within their studies. And those different sources at times reveal more than the previous utilized sources. With this said let us pear into two things one that tie in today and one that further fleshes out the not-too-distant past.

 

After haven followed finance and economics over the years, today we have witnessed much money printing, investment speculation, and even the persistent financialization[1] of the economy. The economy is no longer measured by real people creating real goods and providing services. Many now look to the stock market as though is it an adequate representation of what’s happening within the real economy.

 

We might think that speculation, and what one termed “commercial debauchery” is something new. The more things change the more things remain the same. Even real estate faced within the past some of what we experienced in more modern times in the 2008-2009 housing market debacle. In a discussion concerning a booming period that took place a few years after March 1863, Stanley Jackson in his The Sassoons observes,

 

“No firm could fail to stay afloat during Bombay's four years of high tide, but the Sassoons escaped the disasters which later submerged many of their competitors. So much sudden wealth had led to commercial debauchery. A dozen new companies spawned every day, mostly bogus, and with nothing but paper assets to justify a mushroom rise in values.” (Jackson, 1968, pp. 41-42)

 

Familiar?

 

Furthermore,

 

“The greatest frenzy of all was in land reclamation. With pier room so restricted, the most flamboyant schemes were launched for draining the swamps. Shares in the Back Bay Reclamation Company, 2,000 Rs. at par, soared to 50,000 in a few weeks. Every mud flat on the island was bought, sold and swiftly re-sold, some of the share-pushers having paid only a nominal deposit before issuing a dazzling prospectus. It became superfluous to reclaim a single foot during this wildcat delirium. The lemmings still raced headlong to the golden strip of foreshore.” (Jackson, 1968, p. 42)

 

Even at that time the real estate market had its own shenanigans. Now we will go back to the Hong Kong and Shanghai Banking Corporation to show you another key player during the time when Thomas Sutherland, after he had either moved on or remained as superintendent of the Whampoa dock of the Peninsular and Oriental Steam Navigation Company (P & O, later P & O Nedlloyd), served as a board member. The Sassoons were much savvier than those who got caught up in the speculation and gambling understanding that chasing a quick buck yielded few if any long term return. At some point China seemed a safer and more attractive outlet for capital. However, and quite interesting might I add,

 

 

“… a central banking unit was needed to discount bonds and keep commodities and currencies flowing evenly. The Hong Kong and Shanghai Banking Corporation was duly established by an international group of merchants with a capital % 5 million. It would merge the requirements and interests of the established agency houses and thereby short-circuit delays in referring bills to houses in Bombay and faraway London.” (Jackson, 1968, pp. 42-43)

 

A central bank was needed. Not a new concept and just the bank that was needed was already set up by that time. And then,

 

“Hong Kong was the headquarters, with premises in Queen's Road first rented from the Sassoons and purchased outright from them a year or two later. Arthur Sassoon and Thomas Sutherland of P. & O. were original members of the Board. A major branch was at once set up in Shanghai where the two majestic bronze lions outside the Bank became one of the city landmarks. They would often be touched for luck by passers-by on the Bund. A smaller office was soon established in Yokohama to handle the fattening trade with Japan.” (Jackson, 1968, p. 43)

 

And there you have it folks. Thomas Sutherland and Arthur Sassoon were both on the board of the Hong Kong and Shanghai Banking Corporation. I found this interesting during my studies that one of the major families that are still prominent had a member on the board of the major bank that began in Hong Kong that later set up a branch in Shanghai and would even then later set up a branch in Yokohama to facilitate trade there. We have already covered at least some of what was traded. I do hope that you are seeing the links. Until next time …

 https://cue-talks.blogspot.com/2021/01/nothing-new-under-sun_12.html

References

Jackson, S. (1968). The Sassoons. New York, NY: E. P. Dutton & Co., Inc.

Team, T. I. (2021, June 6). Financialization. (Investopedia, Producer) Retrieved October 6, 2021, from Investopedia: https://www.investopedia.com/terms/f/financialization.asp

 

 

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[1] Financialization refers to the increase in size and importance of a country’s financial sector relative to its overall economy. Financialization has occurred as countries have shifted away from industrial capitalism. The term also describes not just the increase of the market and financial sector's presence in our lives but the increasing diversity of transactions and market players as well as their intersection with all parts of the economy and society. (Team, 2021)