[News] Greensill

[Neville's Breakfast]

Lex Greensill currently being interviewed by a Parliamentary committee about the collapse of the firm. Obviously there are many facets to this financial collapse to discuss, including David Cameron and lobbying. I was particularly interested to watch Steve Baker’s line of questioning and implications on future risk to the economy taken by similar companies. Securitization really isn’t particularly new or innovative. Taking market share by offering below market lending to pharmacies secured on future cash flows seems in this case to have encouraged more and more leverage by the company. Unfortunately for Greensill, lending partners (insurance companies) withdrew, which triggered the collapse. Seems like a clear case of regulatory failure. Fascinating viewing with a lot more to come.

 

[Hugo Rune]

Yup. Very interesting. Here is a great piece by the wonderful Grace Blakeley on Greensill and how he and others have their tentacles working throughout Government.

https://www.doubledown.news/watch/2...called-corruption-david-cameron-lex-greensill

 

[Change at Barnham]

Okay, how many of us opened this thread expecting to read about some transfer speculation?

 

[Neville's Breakfast]

Okay, how many of us opened this thread expecting to read about some transfer speculation?

I meant to call it ‘Greensill Capital’ and somehow didn’t. Sorry

 

[beorhthelm]

Yup. Very interesting. Here is a great piece by the wonderful Grace Blakeley on Greensill and how he and others have their tentacles working throughout Government.

https://www.doubledown.news/watch/2...called-corruption-david-cameron-lex-greensill

its flawed though. a conclusion is we should put all ex politicans on a lifetime pension once they leave, so they never have to take up any other work. doesnt sound good to me. another s to not offer any financial services to any organisation or persons in public sector, hardly fair is it.

 

[Hugo Rune]

its flawed though. a conclusion is we should put all ex politicans on a lifetime pension once they leave

Nope. Have another watch. You have unsurprisingly missed the point completely in a routine attempt for yet another contrarian response.

The conclusion was that ex-Politicians shouldn’t be using connections gained when they were in democratically elected office to earn money after they have left office. In effect, they could get any other job but ‘cash for influence’ roles are not good for this country.

 

[Neville's Breakfast]

Nope. Have another watch. You have unsurprisingly missed the point completely in a routine attempt for yet another contrarian response.

The conclusion was that ex-Politicians shouldn’t be using connections gained when they were in democratically elected office to earn money after they have left office. In effect, they could get any other job but ‘cash for influence’ roles are not good for this country.

That would certainly be desirable. Has anybody ever suggested a regulatory framework that would make it work ? Apologies, I haven’t watched your video as the tabloid title isn’t the sort of analysis I am interested in. When I was watching the BBC coverage I was reminded of the demise of Long Term Capital Management at the turn of the century. It has all the ingredients; leverage, quants with little in the way of risk management skills and regulatory failure.

 

[beorhthelm]

Nope. Have another watch. You have unsurprisingly missed the point completely in a routine attempt for yet another contrarian response.

The conclusion was that ex-Politicians shouldn’t be using connections gained when they were in democratically elected office to earn money after they have left office. In effect, they could get any other job but ‘cash for influence’ roles are not good for this country.

well it would be contrarian because i dont agree. the question is how else do you ensure and police that there is connections, no influence from the old job. otherwise any tenous link, like a ex-minister getting a directorship, will be inflated. its gone on forever, the marked difference in this case being Cameron failed to swing the influence bat.

 

[Hugo Rune]

The point is how else do you ensure and police that there is connections, no influence from the old job.

I’m not sure - it’s a very tough thing to do. Someone smarter than me could probably work something out though. You could require MPs to declare any contact they have received from previous MP’s but people like Tony Blair are clearly being paid for their knowledge and links to the civil service as well as other areas.

What I do know is that, as you say, it goes on all the time and there appears to be no regulations or safeguards to stop it happening.

 

[Neville's Breakfast]

I’m not sure - it’s a very tough thing to do. Someone smarter than me could probably work something out though. You could require MPs to declare any contact they have received from previous MP’s but people like Tony Blair are clearly being paid for their knowledge and links to the civil service as well as other areas.

What I do know is that, as you say, it goes on all the time and there appears to be no regulations or safeguards to stop it happening.

It would require declaring every contact made whilst in office and monitoring of all conversations afterwards. Teams of people would have to analyze this information. Hell of a task. You would also have to stop people getting around the rules by relocating abroad. It may be easier to identify the potential problems than to devise a workable framework.

 

[Lower West Stander]

That would certainly be desirable. Has anybody ever suggested a regulatory framework that would make it work ? Apologies, I haven’t watched your video as the tabloid title isn’t the sort of analysis I am interested in. When I was watching the BBC coverage I was reminded of the demise of Long Term Capital Management at the turn of the century. It has all the ingredients; leverage, quants with little in the way of risk management skills and regulatory failure.

Yes - this is it in a nutshell.

Greensill was offering a pretty good idea. But put too much leverage on it and went too long on his discounting. Credit Suisse pulled the plug and the rest is history. It’s harder to spot because this is accounted for as working capital - not debt.

Football clubs have done this regularly over the years. I’ve been involved in a few financing deals for certain players with teams in Europe where transfers are paid in instalments.

I wonder if Cameron really understood how this worked - that’s the bad bit for me - pumping something without really knowing the implications of becoming too aggressive in the market.


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[Neville's Breakfast]

Yes - this is it in a nutshell.

Greensill was offering a pretty good idea. But put too much leverage on it and went too long on his discounting. Credit Suisse pulled the plug and the rest is history. It’s harder to spot because this is accounted for as working capital - not debt.

Football clubs have done this regularly over the years. I’ve been involved in a few financing deals for certain players with teams in Europe where transfers are paid in instalments.

I wonder if Cameron really understood how this worked - that’s the bad bit for me - pumping something without really knowing the implications of becoming too aggressive in the market.

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So do you think this could be fraud or is it irresponsible risk taking, or do you blame lack of regulation ? I’m interested in your perspective as you seem to know a bit about it. Lobbying is the angle the media are taking which is fair enough but I’m at least as interested in yet another financial market collapse/scandal.

 

[Adders1]

So do you think this could be fraud or is it irresponsible risk taking, or do you blame lack of regulation ? I’m interested in your perspective as you seem to know a bit about it. Lobbying is the angle the media are taking which is fair enough but I’m at least as interested in yet another financial market collapse/scandal.

I work in the industry in Sydney - nothing more to this fiasco than a perfect storm of cheap risk transference, willing underwriter whose employees were looking to score big and very complicit auditors. Same old , same old. Reverse factoring is nothing more than using an AmEx charge card to pay your rent. Yeah you get a one off cash flow boost. But you have to pay it back at some point.

 

[Adders1]

So do you think this could be fraud or is it irresponsible risk taking, or do you blame lack of regulation ? I’m interested in your perspective as you seem to know a bit about it. Lobbying is the angle the media are taking which is fair enough but I’m at least as interested in yet another financial market collapse/scandal.

Edit - deleting comment

 

[Lower West Stander]

I work in the industry in Sydney - nothing more to this fiasco than a perfect storm of cheap risk transference, willing underwriter whose employees were looking to score big and very complicit auditors. Same old , same old. Reverse factoring is nothing more than using an AmEx charge card to pay your rent. Yeah you get a one off cash flow boost. But you have to pay it back at some point.

Well yes - but Greensill was repackaging these into short term bonds and issuing them out into the market. The risk was marketed as the underlying corporate - not Greensill Capital. The idea being that if Greensill went bust, the debt investors would still have recourse to the likes of Gupta.

However this becomes a self fulfilling prophecy - similar to the GFC. The more of this you do, the more aggressive you get, the higher the returns and the more external investors you attract. Greensill was levering his own balance sheet as much as those he was lending to so although it was reverse factoring it was done with a very aggressive twist. Result was more risk on Greensill than those he was lending to - the GFC taught us the problem with borrowing short and lending long.

If it was just basic reverse factoring then regulators can justify non-intervention. But it was much worse than that. The FCA should’ve been much closer to this and Cameron far more transparent abou the financial position of the company he was representing.


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[Neville's Breakfast]

I work in the industry in Sydney - nothing more to this fiasco than a perfect storm of cheap risk transference, willing underwriter whose employees were looking to score big and very complicit auditors. Same old , same old. Reverse factoring is nothing more than using an AmEx charge card to pay your rent. Yeah you get a one off cash flow boost. But you have to pay it back at some point.

Yeah, that was my take. The problem is that these financial collapses from mismanaged risk keep happening and suggest (to me) tighter regulation is needed around risk concentration. Sydney is a lovely place to live BTW. We almost moved there from Singapore at one point. Even had schools lined up. Returned to the UK instead, which I regret.

 

[Neville's Breakfast]

Well yes - but Greensill was repackaging these into short term bonds and issuing them out into the market. The risk was marketed as the underlying corporate - not Greensill Capital. The idea being that if Greensill went bust, the debt investors would still have recourse to the likes of Gupta.

However this becomes a self fulfilling prophecy - similar to the GFC. The more of this you do, the more aggressive you get, the higher the returns and the more external investors you attract. Greensill was levering his own balance sheet as much as those he was lending to so although it was reverse factoring it was done with a very aggressive twist. Result was more risk on Greensill than those he was lending to - the GFC taught us the problem with borrowing short and lending long.

If it was just basic reverse factoring then regulators can justify non-intervention. But it was much worse than that. The FCA should’ve been much closer to this and Cameron far more transparent abou the financial position of the company he was representing.


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So valuation/rating of these bonds was incorrect ? Do the ratings agencies have questions to answer as in sub prime ?

 

[Lower West Stander]

So valuation/rating of these bonds was incorrect ? Do the ratings agencies have questions to answer as in sub prime ?

Valuation of the bonds would’ve been representative of the financial position of Greensill at the time. And nobody looked at it because they were more concerned with the underlying credit. So yes - the valuations were incorrect because no one knew what risk they were actually taking.

Because the bonds were so short (they were originally only designed to back to back the trading invoices they were discounting) they wouldn’t carry a credit rating. The clue was the number of investors who declined to invest because they couldn’t identify the underlying entity. A number of credit committees took the view that they couldn’t prove the underlying risk was representative of the larger corporate they were representing. Some didn’t and I think that was one of the main reasons Tokio Marine pulled the plug. Gupta’s corporate structure, for example, was virtually impossible to decipher.

A total mess and something that the FCA should’ve picked up far earlier. Like the GFC, structurers outwitted regulators. And they will again for the simple reason that they are brighter and earn more money. If it all goes wrong - they don’t care as they already got their bonuses.


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[nicko31]

David Cameron 'made $10m' before company’s collapse

https://www.bbc.co.uk/news/uk-58149765

Panaroma worth a watch, pretty shocking..

 

[herecomesaregular]

Nope. Have another watch. You have unsurprisingly missed the point completely in a routine attempt for yet another contrarian response.

The conclusion was that ex-Politicians shouldn’t be using connections gained when they were in democratically elected office to earn money after they have left office. In effect, they could get any other job but ‘cash for influence’ roles are not good for this country.

I'm not party-loyal and my vote can depend on things relevant at the time, so I have voted Tory in the (distant) past but these revelations prove to me that I never will vote Tory again. I appreciate that the PM job is "under paid and under valued" and I have no qualms with former PMs making some "proper" money after leaving post but there's ways and ways not of doing so. Cameron, what an utter ****.

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