Greenshill scandal

[gavreid]

Greenshill essentially ran a giant Ponzi scheme similar to Carillion. Here's a very good explanation of how it worked from Professor Adam Leaver at the University of Sheffield, it's been allowed to operate by the deregulation of accountancy rules loosely called the 'fair-value revolution'. Cameron was lobbying for state contracts on their behalf through his back door access to Ministers, no doubt for a decent personal slice of the cake...

"This essentially means the business of doing one’s accounts has pivoted towards an evaluation of future cashflows rather than a valuation of past transactions. Many assets are no longer valued on the basis of the price paid for them, but on their current market values or even modelled estimates of the future cashflows they will generate. This also applies to some contracts, where profits are booked on the basis of future expectations. This approach to accounting creates the scope for discretion, subjectivity and speculation. It has arguably made it easier for firms to “recognise” profits than to generate the actual cashflows that support them. And it is here that supply chain financing can be misused."

https://www.theguardian.com/commentisfree/2021/apr/15/what-did-greensill-capital-actually-do

 

[colasblue]

The main issue it seems to me is that they created a new way to conceal the pre-booking sales, which has itself been the cause of many corporate failures. The fact that auditors either allowed or failed to observe that must call the competence of the major audit firms into question.

The thing that actually seems to have stuffed Greensill though is that they were securitizing the transferred debt, which required an insurance contract to make the securities risk free. The insurance company seems to have realised that some of this debt was highly questionable (which making advances against sales not yet contracted must obviously be) and pulled out. This seems to have applied to securities in force as well as new ones, which instantly devalues them.

This is what you get when you allow complex financial structures to exist with nobody in the frame to analyse, monitor and regulate the risks and risk transfers associated. In any properly regulated market Greensill's activities would have been curtailed.

 

[Sue Pertwee-Tyr]

The main issue it seems to me is that they created a new way to conceal the pre-booking sales, which has itself been the cause of many corporate failures. The fact that auditors either allowed or failed to observe that must call the competence of the major audit firms into question.

The thing that actually seems to have stuffed Greensill though is that they were securitizing the transferred debt, which required an insurance contract to make the securities risk free. The insurance company seems to have realised that some of this debt was highly questionable (which making advances against sales not yet contracted must obviously be) and pulled out. This seems to have applied to securities in force as well as new ones, which instantly devalues them.

This is what you get when you allow complex financial structures to exist with nobody in the frame to analyse, monitor and regulate the risks and risk transfers associated. In any properly regulated market Greensill's activities would have been curtailed.

This all sounds suspiciously like the CDOs that did for companies back in the 2008 crash. Different implementation, but a similar concept.

Do these people never learn, or are they deliberately running a scam that they intend to bail out of before it hits the fan?

Either way, this feels like capitalism has utterly jumped the shark, which suggests to me that it thinks it is staring end stage decline in the face.

 

[richardg]

This all sounds suspiciously like the CDOs that did for companies back in the 2008 crash. Different implementation, but a similar concept.

Do these people never learn, or are they deliberately running a scam that they intend to bail out of before it hits the fan?

Either way, this feels like capitalism has utterly jumped the shark, which suggests to me that it thinks it is staring end stage decline in the face.

Jump the shark, new expression for me!

 

[Sue Pertwee-Tyr]

Jump the shark, new expression for me!

Never watched Happy Days, then?

 

[Seeker_UK]

Jump the shark, new expression for me!

It's just another way of saying "nuke the fridge..."

 

[sean99]

Do these people never learn, or are they deliberately running a scam that they intend to bail out of before it hits the fan?

Both. They have learned that while the going is good they can get very rich, and when things go south they'll either be made whole by the taxpayer or be able to walk away with the vast majority of their gains. Financial services have become a giant moral hazard over the past 25 years.

 

[TheDecameron]

This all sounds suspiciously like the CDOs that did for companies back in the 2008 crash. Different implementation, but a similar concept.

Do these people never learn, or are they deliberately running a scam that they intend to bail out of before it hits the fan?

Either way, this feels like capitalism has utterly jumped the shark, which suggests to me that it thinks it is staring end stage decline in the face.

Bernie Madoff passed on at the Butner Federal Correctional Complex, North Carolina yesterday. Bernie took $20bn off people and never gave any back. It was only the crash of 2008 (where, as Warren Buffett would say, ‘when the tide goes out you get to see who’s been swimming naked’) that Bernie was exposed and there wasn’t much there to look at.
Still, we are in safe hands- the Conservatives are the party of fiscal prudence and of business. They’ll see us right.

 

[richardg]

Never watched Happy Days, then?

Hated it

 

[Sue Pertwee-Tyr]

Hated it

Me too, never saw the episode in question, but I was aware of the expression, and it’s origin.

 

[sean99]

Bernie Madoff passed on at the Butner Federal Correctional Complex, North Carolina yesterday. Bernie took $20bn off people and never gave any back. It was only the crash of 2008 (where, as Warren Buffett would say, ‘when the tide goes out you get to see who’s been swimming without a bathing costume’) that Bernie was exposed and there wasn’t much there to look at.
Still, we are in safe hands- the Conservatives are the party of fiscal prudence and of business. They’ll see us right.

Madoff made the critical mistake of ripping off wealthy people. The trick is to skim from the poor and middle class, because then you will suffer no repercussions.

 

[MikeMA]

I'm praying this will do for Johnson's government what cash for questions did for Major's, only worse. Here's hoping.

 

[Stuart Frazer]

I'm praying this will do for Johnson's government what cash for questions did for Major's, only worse. Here's hoping.

Major had a marginal majority (21), whereas BlowJo has a good working majority (80) which he can usually rely upon - Labour’s recent motion to establish a select committee to investigate the lobbying of government was defeated 357:262

Starmer and Labour really need to now drive the Sleaze Agenda and stick the Sleaze Label on the Tories if they are to build anything towards being an electable party.

 

[droodzilla]

How do you pronounce it?

Greens-hill or Green-shill?

 

[myles]

Never watched Happy Days, then?

That's Fonzie, not Ponzi. Ehhhhhh!

 

[TheDecameron]

I'm praying this will do for Johnson's government what cash for questions did for Major's, only worse. Here's hoping.

You would think so but there’s a shamelessness to Johnson. Like his US counterpart, the working principle is never admit you’ve done anything wrong, never apologise. He’s done far worse- unlawfully closing Parliament, misleading the monarch and exposing women MPs to further threats by repeating the language in Parliament already mimicked from him by invisible hands making death and rape threats to the same MPs. Ministers abusing their office are afforded the same protection from censure.

 

[matt j]

How do you pronounce it?

Greens-hill or Green-shill?

Neither because there's no H in it!

 

[Darmok]

Money Stuff: Imaginary Invoices Are Hard to Collect

Matt Lavine on Greensill and others...

https://newsletterhunt.com/emails/16696

Punter cameron v bunter depiffle, hehe.

 

[Jim Audiomisc]

This all sounds suspiciously like the CDOs that did for companies back in the 2008 crash. Different implementation, but a similar concept.

Do these people never learn, or are they deliberately running a scam that they intend to bail out of before it hits the fan?

What they 'learn' is to find new ways to run the same old game. They focus on various forms of "grab the money and stash it away abroad whist ensuring things look OK on the shown surface." Just use different sorts of 'cover' for it as each old form is sussed.

Hence tricks like "sell off all the buildings and machinery and 'rent them back'". The result allows them to pay themselves and their chums a big dividend to stash away. Then sell the firms to a mug who only sees that year's 'profit' (sic) and leave them to carry the can.

Banks who use finance to bankrupt firms because the bank can make a quick profit by sucking the blood out of the firm and ruining its owners.

The large accountancy firms act as 'consultants' to advise on new ways to do this 'legally'. That won't end unless we ensure by law accountants can't do the other 'services' they offer like these.

CF PE Ad Naus.

 

[Coda II]

You would think so but there’s a shamelessness to Johnson. Like his US counterpart, the working principle is never admit you’ve done anything wrong, never apologise. He’s done far worse- unlawfully closing Parliament, misleading the monarch and exposing women MPs to further threats by repeating the language in Parliament already mimicked from him by invisible hands making death and rape threats to the same MPs. Ministers abusing their office are afforded the same protection from censure.

This reminds me of a question I have been meaning to ask and this context seems as good as any: to what extent do people who behave in this manner know that what they are doing is wrong? Gaslighting in its many forms re-enters the news cycle pretty regularly and many of these behaviours are common, persistent lying, complete failure to acknowledge responsibility for things that go wrong, convincing others that it is actually them that are wrong and so on. What I have not seen discussed is whether people do these things deliberately as part of a grand scheme or whether it is part of their make up which, if left unchecked, runs its natural course. I assume it goes without saying that the people involved here knew they were exploiting the system for their own benefit, but were they consciously and deliberately doing something they knew to be wrong, or in their own view was it actually just making the most of the system?