The Pyramid of Lies by critic Duncan Mavin – the disgraced financier who charmed David Cameron | Political books
MModern bribery is a refined process for sophisticated people. Urban actors enter into the political equivalent of a “buy now, pay later” (BNPL) agreement. Politicians or officials grant a shady financial institution or an incompetent arms manufacturer access to decision-making and public money. No deal needs to be made. No wad of cash changes hands. But after the civil servant has retired or the politician has left parliament, he can look forward to extremely rewarding work. The one benefit of Greensill Capital’s multi-billion collapse in 2021 was that it illuminated BNPL politics like no other scandal has.
Lex Greensill and David Cameron were so made for each other that they wanted to be each other. Greensill grew up on a sugar cane farm in North Queensland. He escaped for a job in the Sydney financial sector, then in the London office of Morgan Stanley. He even stood out in this world. His colleagues called him “the demon” and “the psychopath”. He told them he wanted “to earn billions and billions of pounds”.
But the outback boy also yearned to adopt English upper-class mannerisms: that famous polish, that effortless superiority. When he founded Greensill Capital in 2011, he ordered his headquarters in central London to be decorated in the baronial style. The wood-paneled, chandelier-adorned dining rooms of the Savoy Hotel across the street have become the office canteen. His Savile Row suits and rural retreat on the Welsh borders screamed that this was a man desperate for a touch of class.
Cameron was a genuine upper class member who could polish it. After destroying his career and the country’s prospects by mistakenly pulling the UK out of the EU, Cameron yearned for a comfort that Lex Greensill could offer him: obscene sums of money.
As early as 2014 Greensill had an office in Cameron’s Downing Street with a briefing to present ideas on ‘supply chain finance’ across Whitehall. He claimed he was a democratizing ‘disruptor’ who could bring all the benefits big business enjoyed to small pharmacists awaiting payment from the NHS, and potentially to all other public sector providers as well.
Supply chain finance addresses a problem as old as trade. Farmers, for example, want a supermarket to pay for their goods on delivery. But the buyer wants to delay payment until he has sold the goods, maybe 90 days later, maybe longer if the buyer is unscrupulous. The financial institution steps in. He pays the supplier most of the bill all at once – maybe £99 out of £100. He takes the £1 cut and then collects the full £100 from the supermarket when he is ready to pay.
The problem is that a sane bank would only want to deal with big, reputable companies that would pay their debts. A sane bank would also be a boring bank because the profits from its transaction discounts are so small. Often there is no profit. Banks are offering supply chain finance as a loss leader for corporate clients, hoping the goodwill gesture will further boost trade.
Greensill used 2010s peddler language to claim he could blow up this frozen market. Low interest rates and quantitative easing have pushed investors to seek high yields. Greensill Capital presented itself as a company that could dominate its industry the way Google and Amazon dominated theirs. It was a force of justice and democracy that wanted to give small businesses everywhere the same advantages enjoyed by big businesses. No buzzword has been ignored. Greensill claimed to be a “fintech” company, even though it used other people’s technology. With new technology and new ideas, he boasted, it could be worth tens of billions.
It wasn’t just the Cameron government. Credit Suisse and SoftBank fell for it and racked up billions.
The great merit of Duncan Mavin’s formidable book is to show the emptiness behind the bombast. Lex Greensill wasn’t a budding tech mogul. He couldn’t turn supply chain finance into a hugely profitable industry. It was the same boring business it had always been. Greensill sought profit like other bankers sought profit by lending to customers. But in Greensill’s case, it was all too often risky customers. He thought the insurance would cover him if the loans went bad. If not, he was a great salesman, who could always persuade investors to put in more money.
Mavin, who covered the story for the the wall street journal, is a meticulous journalist. But he argues that there is a simple fact behind the complicated details of the scandal. Greensill Capital was an “extravagant Ponzi scheme” (although Greensill denied it) that relied on paying existing investors with funds from new investors as surely as any other racket.
The endorsement of the Cameron government mattered commercially. Whitehall awarded contracts to Greensill “for projects that Greensill had offered when he was working at Whitehall”. Greensill used the CBE the Tories gave him as a mark of quality assurance, and in 2018 pocketed the former prime minister himself.
Greensill gave him hundreds of thousands of pounds in salary. He added stock options he could cash in before the company was founded, which amounted to millions, and offered the prospect of around $60 million when Greensill Capital finally went public. . Greensill got the class, Cameron got the cash, as the two circled the globe trying to woo European and Asian investors. An easy and lazy job for an easy and lazy prime minister.
I, and I suspect many others, believe that outrageous financial schemes cannot last. But Bernie Madoff ran the biggest Ponzi scheme in history from the early 1990s until the financial crash of 2008 blew it up. The pandemic has served the same destructive function for Greensill Capital. When investors withdrew or attempted to withdraw their money, insurers announced they would no longer provide cover and Credit Suisse froze its funds. The last pages of The pyramid of lies are grimly comical as they cover Cameron’s frantic lobbying of the government to extend Covid rescue facilities to his benefactor. To their credit, Rishi Sunak, Sir Jon Cunliffe at the Bank of England and Sir Tom Scholar at the Treasury refused. The government was already bailing out companies, why did they need Greensill?
It was a good question that should have been asked years ago.