Greensill Lobbied BOE for $28 Billion Support as Covid Hit
(Bloomberg) -- Former Prime Minister David Cameron helped Lex Greensill lobby the Bank of England to make as much as 20 billion pounds ($28 billion) of funding available to companies as part of the financier’s campaign to get access to the government’s coronavirus assistance programs.
As Cameron made “persistent” calls to Treasury officials as the firm sought to get access to financing from the Bank of England, he also contacted officials at the central bank to introduce Greensill and set up calls with officials.
The revelations were part of a document dump from U.K. government officials and the central bank, which broke their silence in the row over lobbying by Cameron for Greensill Capital. The letters uncovered the extent of Greensill’s effort last year to get access to state-run coronavirus aid programs before it collapsed into insolvency last month.
The episode capped a spectacular fall from grace for founder Lex Greensill. The scandal has entangled some of the world’s biggest financial firms, from its largest investor SoftBank Group Corp. to key partner Credit Suisse Group AG. Cameron joined Greensill in August 2018, just over two years after resigning as U.K. Prime Minister.
In a letter and call with the BOE, Greensill asked for the central bank to revive a facility from the financial crisis more than a decade ago to make money available for supply chain finance firms -- a market in which Greensill’s firm was the largest player.
Institutional investors “are unsettled and seeking redemptions,” Greensill wrote in a letter on March 16 to BOE deputy governor Jon Cunliffe. Exchanges between the two were published by the central bank on Thursday. “It is critical to establish the supply chain finance investor base as a matter of urgency,” the financier wrote.
After referring to the BOE’s 2009 Secured Commercial Paper Facility, which was designed to support the flow of credit to U.K. firms and allow suppliers to receive earlier invoice payments, Greensill wrote that “the Bank of England can again play a crucial role in keeping the market to fund supply chains open to capital markets and bank investors.” The BOE should set up a facility in “the order of” 10 billion to 20 billion pounds, he said.
When the BOE subsequently established a support fund -- the Covid Corporate Financing Facility -- it excluded financial companies. A separate string of heavily redacted correspondence published later in the day by the Treasury showed Greensill sought to persuade the government to expand that facility.
“We understand Greensill is proposing up to 4.3 billion pounds equivalent of assets for inclusion into the CCFF initially, eventually potentially rising to over 10 billion pounds,” Treasury Second Permanent Secretary Charles Roxburgh wrote to Greensill on March 30 last year. He said that Chancellor of the Exchequer Rishi Sunak indicated “no intention” to change the program to accommodate Greensill.
Also in the Treasury correspondence is an email on March 21, 2020, to Roxburgh from an official whose name is redacted showing skepticism about Greensill. The official wrote that the Treasury “ought to press” Greensill on the geographical spread of suppliers that would benefit from the government help. Greensill had said only that the companies would be “substantially” in the U.K. The official also remarked “it’s interesting he did not agree to share a list of the largest investors with us.”
In April, Cameron resumed efforts for the finance company.
“Greensill -- who I work with -- have had numerous conversations with HMT but have failed to get anywhere,” he wrote to Cunliffe on April 3, referring to the Treasury. “The request is simple -- please include in the CCFF the ability to purchase bonds issued in respect of supply chain finance. These allow us to pump billions into SMEs, (including every pharmacy that works with the NHS).”
“At a time when we are -- rightly -- worried about how quickly banks can get loans out to small businesses, why are we potentially cutting off a market that already pumps cheap credit directly into SMEs,” he wrote. “I think I must be missing something here. Am obviously talking to HMT, but would be grateful for any light you could shed on this.”
The letters added to details of lobbying that emerged from a hearing in Parliament on Thursday.
“They were persistent -- that would be an accurate adjective to use,” Roxburgh testified at a hearing. “We looked at it and decided not to take it ahead.”
Roxburgh said he had nine meetings with the firm to discuss their applications for Treasury programs. It was also revealed that Cameron personally lobbied the Treasury’s top official, Tom Scholar, who had previously worked for Cameron as a senior adviser on international affairs. Scholar said they did not discuss the substance of any Greensill proposals during their call.
Greensill applied to have some of its loans covered by the Covid Corporate Financing Facility program and that was rejected by Treasury staff, according to Roxburgh.
Greensill’s proposal was “not consistent with the terms of the scheme because they were non-standard. That was not the way the scheme was set up,” Roxburgh said. “So we rejected it.”
Greensill was however an accredited lender under another of the government’s coronavirus loans programs -- the Coronavirus Large Business Interruption Loans Scheme -- and sought to persuade Treasury officials to raise the cap on the loans it could issue under that plan to 200 million pounds from 50 million pounds.
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