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The carpet-bagger, the Etonian and the murderer

March 30, 2021

What a great story this is from the FT. It turns out that Lex Greensill, sleazebag Ozzie founder of recently collapsed Greensill Capital, former British Prime Minister ‘Brave’ Dave Cameron, and murderous Saudi tyrant-in-waiting Mohammed bin Salman went on a camping holiday together in the desert last year. It must have been tremendous fun.

More recently, Brave Dave, a highly-paid adviser (with a potential US$70 million of share options) of the delightful Lex Greensill, sent numerous text messages to the private number of British Chancellor Rishi Sunak urging him to extend special Covid loans to Greensill. Unfortunately, the phone reception in Oxfordshire is so poor that Dave has been unable to respond to journalists’ enquiries.

It is reassuring to see, in the wake of the Global Financial Crisis, that almost nothing has changed in the nexus between amoral financial services ‘professionals’ in the City of London and on Wall Street and Establishment politicians who fill their boots with the sector’s cash flows after leaving office. Greed is still good.

Also breaking since late last week is the story of Archegos Capital Management, founded by Bill Hwang, who was fined US$44m by US securities regulators in 2012 for trading on insider information about Chinese banks, but managed since then to borrow of the order of US$40 billion from global investment banks. Bill built an investment portfolio of around US$50 billion at its peak with as little as US$1 of equity for every US$8 of debt. He used derivative, total-return swap contracts as the basis for his portfolio, which meant no one could track the huge positions he was taking in the market (well done regulators — who are those mugs who said you’d learned your lesson?). Actual ownership of the stocks stayed with the prime brokerage units of the investment banks, which held them as collateral against the loans they extended to Bill.

What a great plan. The only, small oversight came with the recent sell-off of the kinds of growth stocks Bill liked to buy. When the investment banks asked Bill to put up more margin, it turned out he couldn’t or wouldn’t. Last Friday, the investment banks panicked and dumped an estimated US$20 billion of stock in a handful of firms into the market, with a predictable impact on prices. Credit Suisse (which was also a lead financier for Greensill and for the unfortunately named 2020 long-firm fraud Luckin Coffee) is headed for a hit of US$3-4bn, Nomura one of up to US$2bn.

Robert SmithArash MassoudiCynthia O’Murchu and Jim Pickard in London. 29 March 2021


Lex Greensill had penetrated the British establishment, forging close links with the country’s highest-ranking civil servants and ministers and lobbying for lucrative government contracts.

Now the Australian financier had a new sovereign client in mind, where wealth and power were more concentrated and the right relationships could transform his business: Saudi Arabia.

Before Greensill Capital collapsed this month, one of Lex Greensill’s favourite anecdotes was a camping trip he said he had taken with David Cameron and Saudi Crown Prince Mohammed bin Salman. Accompanied by the former UK prime minister, who was now his paid adviser, Greensill visited the desert with Prince Mohammed, the kingdom’s de facto leader, according to three people who heard his account of the journey. 

One of the people placed the trip during January or February 2020, shortly before the spread of coronavirus largely halted international travel. Flight records for Greensill Capital’s four private planes show a series of trips to Saudi Arabia in the first three months of last year.

A second person who heard Greensill’s account of the trip said the Australian financier explained he bonded under the night sky with the Saudi royal, commonly known as MBS, over the fact the two men had both studied law at university.

Greensill Capital declined to comment. The Saudi embassy in London declined to comment. The Financial Times has attempted to ask Cameron about the account of the desert camping trip several times, but the former prime minister has ignored the inquiries.

His role in the company’s downfall has come under growing scrutiny, after the FT revealed he lobbied former colleagues for greater access to emergency government Covid loan schemes.

Cameron, who once stood to make tens of millions of pounds from Greensill share options before the company’s collapse rendered them worthless, visited Saudi Arabia publicly in October 2019, attending the so-called “Davos in the Desert” summit in Riyadh.

The trip — a year after the murder of journalist Jamal Khashoggi by Saudi agents — was criticised at the time by Amnesty International, which said the former prime minister’s attendance would be “interpreted as showing support for the Saudi regime” despite its “appalling human rights record”.

Cameron, who charges at least £120,000 per hour for speaking engagements, frequently used Greensill’s corporate jets to travel around the world, according to several people familiar with the matter.

The FT has also seen a photograph of him aboard one of these plushly furnished aeroplanes. Flight records for one of Greensill’s aircraft show numerous trips to and from Newquay airport, which is around half an hour’s drive from Cameron’s holiday home in Cornwall. 

Greensill’s fleet of aircraft, an unusual luxury even for the largest multinational companies, came in useful during another visit to Saudi Arabia. In August 2019, SoftBank chief executive Masayoshi Son and his top lieutenant Rajeev Misra had been holding meetings in the commercial centre of Jeddah when they were invited to visit Yasir al-Rumayyan in the capital Riyadh.

Rumayyan was head of the country’s Public Investment Fund, which is in turn the largest investor in SoftBank’s $100bn Vision Fund, which has backed valuable start-ups from Uber to DoorDash.

As the men looked to change flight plans, Greensill spoke up to offer them a ride on his private jet. Some of those present were amazed the unassuming Australian had his own plane.

But Greensill, then 42, had recently cemented his status as a billionaire thanks to SoftBank’s investment in his eponymous finance company. He explained he had not one, but multiple aircraft. “We need it for clients,” one attendee recalls him explaining. “We need an air force.”

Greensill’s engagement with Saudi Arabia was multi-faceted. Last June, senior Greensill executive John Luu spoke at the “UK-Saudi Virtual Fintech Week”, an event hosted by the UK’s Department of International Trade and the British embassy in Riyadh.

The event’s marketing material touted the UK’s “progressive regulators” and Saudi Arabia’s “young and tech-savvy population”. “We are a firm that not many people have probably heard of,” Luu said at the event. “And yet, at the same time, our reach is pretty broad.”

He went on to explain that Greensill Capital was not only “part of the family” of Saudi’s PIF due to the company’s backing from SoftBank, but also that the finance firm had “just penned an agreement to become joint-venture partners” with the sovereign wealth fund. “As part of that, we’re establishing offices in Riyadh,” he added.

PIF did not respond to a request for comment. Luu, whose LinkedIn profile described his role as “spearheading Greensill’s expansion into Saudi Arabia”, also said at the event that his company had contracts with “some of the largest companies in the Kingdom”, but declined to name any of them.

The one company that seemed to be the target of a multiyear charm offensive in the country was state-controlled oil company Saudi Aramco. Greensill frequently touted that his company was in line to win a lucrative contract to offer so-called supply-chain finance to Aramco, according to people familiar with the matter.

Also known as reverse factoring, Greensill’s signature financing technique involves paying a company’s suppliers upfront at a discount and is known for its ability to flatter corporate balance sheets. The finance company never actually ended up providing any supply-chain finance to the oil company, however. Aramco, which also counts Rumayyan as its chair, declined to comment.

Greensill was also involved in some even more speculative financing proposals in Saudi Arabia. During the 2019 trip to Jeddah, SoftBank executives were examining how they could help the desert kingdom modernise the holy city of Mecca, which draws millions of visitors each year during the Islamic pilgrimage known as the hajj.

Different companies in the Vision Fund could play a role: US construction start-up Katerra to build new structures, Hong Kong artificial intelligence specialist SenseTime to offer facial recognition, while India’s Oyo could help set up hotels for visiting pilgrims. And Greensill would package all this up into investment products to finance the project.

Son at this time believed the Australian financier was capable of funding increasingly grand schemes, according to people who know the SoftBank founder. He even frequently introduced Lex Greensill by a pithy nickname: “the money guy”.

“He was part of the overall solution for a smart city for Mecca,” said a person involved in the talks. “That’s why Lex was down there. He was doing the financing.” The grand vision, again, never came to fruition.

Additional reporting by Anjli Raval

Twenty-two years old

March 1, 2013

Bradley Manning was 22 years old when he was arrested. Today he entered his plea in military court after almost three years in US military detention. His long statement was read with composure and, at face value, reflects a person who stands by the logic of what he did.

Manning’s story is well-reported in The Guardian (and this is tangentially important). This 20-minute video is a useful introduction if you are not in a mood to read, but the idea that he was mad rather than rebellious does not stand up for me.

It remains for the USG to prove that Manning endangered national security. In the court of public opinion, I do not think this will be possible.

 

More:

One way to think about what Manning did, and the significance of it, is to watch this documentary about the US dirty war in Iraq. (It builds on a celebrated New York Times magazine cover story from 2005.)

Elections in Disneyland

February 18, 2013

Only a week now and the kids are asking: ‘Who’s gonna win, daddy?’ How do I know, when the people running are larger than life itself.

 

Mickey Mouse. The original cartoon character. He’ll make you laugh. He’ll make you cry. And if you are under 20, he may well offer you cash for a quick one. Mickey has posted a late surge in the polls as many Italians conclude that no one will ever be funnier.

Ital election Mickey face

Ital election berlusconi face

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mini Mouse. Billed as a new kind of mouse, Mini turned out to be much like Mickey — all talk, talk, talk — but not nearly as funny. Mini speaks English, but who cares except the foreigners who pay Disneyland’s bills? May have to move to Brussels.

Ital election mini

Ital election monti

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goofy. Definitely funny. Appears daily in the piazza encouraging citizens to shout ‘Fuck Off’ at no one in particular. Indubitably a new kind of political animal. However a lack of facial grooming and tendency to piss on public monuments leaves the average Italian concerned he undermines the national image for form over substance in all things.

Ital election goofy

Ital election grillo red beret

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald Duck. What’s the problem with Disneyland? If only everyone listened to Donald, Disneyland would run fine. Donald is a well-meaning, somewhat gruff old time favourite, yet somehow never quite as funny as Mickey.

Ital election donald duck

Ital election bersani

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Projected outcome: Coalition of family favourites. Loads of laughs for everyone except Italians.

Ital election that's all folks

Thought food

January 31, 2013

Here is a rather powerful piece of writing – particularly the historical analysis in the first half — encouraged by The Guardian’s George Monbiot having turned 50.

It connects up to this article about Nick Clegg who, I think, fails to recognise that if the Liberal Democrat party cannot be more principled than the Labour party, then there really is no reason whatsoever for its existence.

 

Completely separately

Have I entered a parallel universe, or did I just give a speech to a large conference in the US at which these were the newspapers people were reading?

Image

A perfect 10

November 28, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There have been a few of these cock-ups in recent years. But this latest one takes the biscuit.

The People’s Daily, mouthpiece of the Communist Party of China, has reprinted a story from The Onion claiming that North Korean leader Kim Jong-un has been voted ‘sexiest man alive’.

The Associated Press explains here. Or read the same in the Washington Post. The original Onion article is here. Sadly The People’s Daily has now taken its story down.

Fit for a King

October 21, 2009

Mervyn King, governor of the Bank of England, finally comes out and tells it (more or less) like it is. Bless him. In a speech to businessmen in Edinburgh, Mr King observes that the Anglo-Saxon financial system has so far been bailed out, to the tune of trillions of dollars, with no fundamental change in the way the banking system operates. Huge bonuses will again be paid to bankers this year-end, despite the fact their earnings depend on a limitless supply of almost free taxpayer money. We give them free money, they make a profit: clever stuff.

Mr King suggests this is unfair, paraphrasing Churchill: ‘never in the field of financial endeavour has so much money been owed by so few to so many,’ he says. The solution turns out to be the same one that people like the governor figured out 80 years ago, in the wake of the Great Crash. The retail and investment functions of banking need to be separated, so that speculative activity by investment bankers faces a serious prospect of punishment by bankruptcy when things go wrong. When every kind of financial function is merged under one roof, this does not happen. In the latest crash: ‘Banks and their creditors knew that if they were sufficiently important to the economy or the rest of the financial system, and things went wrong, the government would always stand behind them,’ says Mr King. ‘And they were right.’

Of course Mr King does not mention America’s Glass-Steagall Act of 1933, which split banking functions in order to ring-fence speculative activities. That would be tantamount to admitting that banking regulators have not learned anything for the best part of a century. But his logic is exactly that of Glass-Steagall when he describes banking functions that are necessary to the community and those which are simply a matter of private speculation: ‘The banking system provides two crucial services to the rest of the economy: providing companies and households a ready means by which they can make payments for goods and services and intermediating flows of savings to finance investment,’ says Mr King (he could have put the second point more clearly by saying that banks, uniquely, provide working capital to industry). ‘Those are the utility aspects of banking where we all have a common interest in ensuring continuity of service,’ he goes on. ‘And for this reason they are quite different in nature from some of the riskier financial activities that banks undertake, such as proprietary trading.’

Mr King’s reflections on the financial crisis are about as candid and thoughtful as anyone connected with government in the UK or the US has managed in the past year. He is quickly supported by a forceful opinion piece from Martin Wolf in the Financial Times. Sadly, however, it is highly unlikely that there will be a new Glass-Steagall Act on either side of the Atlantic. The senior economic advisers to the Anglo-Saxon governments, whether Fat Larry Summers or Alastair ‘Hello’ Darling, are far too spineless and mired in the mathematical drivel of ‘modern’ economic theory. There will be an incremental regulatory ‘solution’ to the financial system’s instability, involving new rules relating to capital adequacy. This has been tried for decades, and does not work because banks’ prudential requirements for capital vary over the economic cycle and cannot be reduced to a workable regulatory formula. Still, there will be lots of new jobs for regulators until the next financial crisis.

A simple, radical solution, as Mr King recognises, is what is actually needed. It should not be embarrassing to admit that what people figured out in the 1930s is better than what their successors thought in the 1990s (when Glass-Steagall was finally repealed under Bill ‘Mind-On-Other-Things’ Clinton).

 Moreover, there is one new thing that governments could do to stop the cycle of ever more severe financial crises that has afflicted the world since the end of the Bretton Woods fixed exchange rate system in 1971. There is not a hope in hell that this change will be discussed, let alone happen, but it is worth mentioning. The change is simple: end the absurd tax treatment of corporate debt, whereby interest on debt is deductible as a business expense before taxes are paid. This is not the case with equity, where dividends have to be paid after tax. The contrasting, and logically indefensible treatment of debt and equity in contemporary tax systems first encourages companies (including banks) to load up on debt, and second discourages the creation of more employee-owned firms. It is one of those things that is so dumb, so fundamentally wrong, that it is not even discussed.


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