According to the shadow foreign secretary and former Conservative Party leader William Hague, it is necessary to go back centuries to find a financial crisis of similar magnitude to the one we are now facing. He was drawing a parallel between the situation faced by political and financial leaders today and the one faced in 1797 – more than 200 years ago. Hague, who has written a biography of William Pitt the Younger told the audience at the ACT annual dinner in London in November of the banking crisis of 1797 when Pitt was prime minister. In the late 18th century, with doubts over the sufficiency of the reserves of gold and silver bullion, a crisis of confidence almost led to the collapse of the Bank of England. Pitt led a rescue which ensured that confidence was restored and laid the foundations for the modern financial system. Today’s leaders have been faced by a series of crises – sub-prime, banking, economic – and, even as Hague was speaking, worries that a currency crisis for sterling was in the offing. Underlying all of these problems, as Pitt understood and dealt with in the 18th century, was a draining away of confidence. A new cliché emerged in the past few months that bankers had lost confidence in each other and therefore would not lend to each other. As the economy slid into recession the fear has emerged that bankers are losing confidence in their corporate and personal customers and therefore won’t lend to them. And as governments pump money into the system and half threaten, half cajole the banking system to start working again there is no consensus that the measures will work. While all this is happening, treasurers have to get on with the day job. Now liquidity is central to these problems treasurers are at the heart of the issue. They need to start to lead us out of this crisis of confidence. Not by false hopes or by whistling in the dark but by working with all parties to ensure that business and trade can carry on as best as possible. Some treasurers will be working in distressed companies which will have to undergo restructuring. Whatever the situation treasurers need to ensure that the financial lines of communication stay open at all times so that all stakeholders (bankers, the board, suppliers and customers) have timely and accurate information, forecasts and projections on which to base sensible and calm decisions. As the story of Pitt proves, take the right action and it is possible to emerge in a better place even after a time of great crisis.
