A tale of two duck shooting trips: Origins of US Fed and Bangladesh genocide
Drawing lessons from the secret duck-hunting trip that birthed the US Fed and the dark Pakistan’s Larkana conspiracy of 1971, this piece explores how intention shapes financial reality as 36 Bangladeshi banks unite for "Saving City Group."
The headline of a recent TBS news story "Saving City Group: 36 banks move to restructure its Tk26,600cr loans" reminds me of the title of American epic war film "Saving Private Ryan."
The plot of the film lives up to its title. The film depicts a harrowing journey of a squad dispatched to rescue from another battlefield the last surviving brother of the Ryan family whose three brothers have been killed in combat.
The title "Saving City Group" tells the story of a move by thirty-six banks, including two foreign lenders to rescue the City Group, one of Bangladesh's largest conglomerates, as the company struggles with more than Tk26,600 crore in outstanding loans, according to the TBS report.
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Senior bankers from more than a dozen banks met at Hotel Sonargaon in Dhaka on 19 June and formally embarked on the mission: "Saving City Group." They have decided to appoint an independent auditor before moving forward with any restructuring of City Group's loans. A review committee comprising representatives from leading banks has also been formed, says the report.
Can the mission succeed? Can bankers make a difference in times of needs and crisis? History says they can.
The quirky creation story of the US Federal Reserves can be retold. Let's cut the long story short. In 1907, when a banking collapse threatened the US banking system, leading financier J.P. Morgan came forward and summoned colleagues to his Madison Avenue mansion and locked the door.
'This is the place to stop the trouble,' he told them as Andrew Leigh, former economics professor of Australian National University, writes in his book "How Economics Explains the World." Morgan pledged millions of dollars to at-risk banks and persuaded his fellow bankers to do the same. The panic subsided. Business got back to normalcy. But the top bankers did not stop there. They kept exploring ways to avert any such crisis in future.
Three years down the line, representatives of major US commercial banks again took the initiative. They planned to meet and discuss whether any mechanism could be developed. They convened a secret ten-day meeting on Jekyll Island in Georgia.
But they wanted to keep the meeting away from the media. They made a plan. The bankers pretended they were going on a duck-hunting trip. They boarded their train one at a time so as not to be seen together. One banker apparently even toted a shotgun to give the trip an air of authenticity.
They came up with a report proposing the architecture of what would become the US Federal Reserve, eventually comprising twelve regional banks with the power to issue currency. Following a series of tense negotiations in Congress, the Federal Reserve was created in 1913. The United States would not be solely reliant on financial plutocrats to avert the next banking crisis.
The rest is history.
Take another story of a duck-shooting trip.
It was at a duck-shooting trip in Pakistan's Larkana, the hometown of Zulfikar Ali Bhutto who lost in the 1970 election, when the seed of the genocide in Bangladesh was sowed.
Bhutto and President of Pakistan Yahya Khan met there to discuss how not to hand over power to Mujib. The Larkana Conspiracy, as it is termed, was basically the root of the incidents that followed later including the nine-month genocide and destruction and the bloody War of Independence.
Intention shapes reality.
The duck-shooting trip by the US top bankers paved the creation of the Federal Reserve-- the central bank of the United States with core responsibilities to manage the nation's monetary policy, promote financial system stability, regulate financial institutions, and ensure the safety of the payment system.
Professor Andrew Leigh writes central banks had existed since the seventeenth century (the Bank of Amsterdam, the central bank of Stockholm and the Bank of England were all founded in the 1600s), but in the twentieth century, central banks increasingly took on the role of providing stability to the economic system.
"Regular commercial banks use money from short-term deposits to make long-term loans. Because they borrow short and lend long, even the best-managed bank is vulnerable to running out of cash if all its depositors simultaneously demand their money back. By guaranteeing people's deposits, a central bank can prevent bank runs, and make the financial system more stable," he writes.
The same question again. Can our bankers make a difference and set an example in the financial sector by "Saving City Group?"
The banking sector itself has been reeling from severe shocks. The unprecedented rise of default loans is a reflection of bad governance in the sector. The central bank itself had allegedly been captured by the oligarchs who looted the banks in the name of taking loans.
The same line can be repeated: intention shapes reality.
