Getting into Morgan Stanley’s MBA internship programme is one of the toughest tickets in banking. Tens of thousands of eager wannabes apply for the coveted positions. A tiny handful make it through. In 2005, the giant Wall Street bank only accepted applications from a select group of elite international universities – the likes of Oxford or Cambridge, INSEAD (Institut Européen d’Administration des Affaires) and NYU (New York University). The University of Manchester’s Alliance Manchester Business School, where Lex Greensill was studying for his MBA, was not on the Morgan Stanley approved list.
For Lex, that was a challenge, not a firmly shut door.
In the mid 2000s, the big global banks were booming, riding a wave of deregulation, new technology and cheap funding to greater and greater profit. Ambitious, aspiring executives on the make knew that the most direct path to extraordinary riches began at the doors of the biggest banks in the world.
Lex had two of the most fabled institutions in his sights – both appealed to his desire for high status and his unwavering belief that he would one day sit at the top of the global financial establishment. One was Rothschild, the centuries-old, blue-blooded London investment bank whose hushed halls are decked with Old Masters. The other was Morgan Stanley, Wall Street’s so-called ‘white shoe’ bank (white buck suede Oxfords were once the hallmark of upper-class American bankers). Both institutions were known for a traditional, slightly stuffy culture. In the introspective hierarchy of the banking industry, they were also at the very peak.
In Lex’s later version of events, he could have chosen to work at either firm, but he rejected Rothschild in favour of the American bank. It was more exciting, more forward-looking, better suited to his sense of enterprise and drive. He had also found an inside track that would help him secure a place there.
David Brierwood was a veteran of Morgan Stanley’s UK business since the 1980s. A guitar-loving British banker, Brierwood had risen through the ranks for two decades, becoming the chief operating officer of the securities division – a highly prominent role in Morgan Stanley’s London office. He had a profile and network that spanned the bank’s global reach.
Brierwood was also an alumnus of Manchester Business School. For many senior bankers, like Brierwood, it was a part of the role to scout your alma mater for talent at campus drinks and social events. That’s where Lex came in. The young Australian was impressive, relentless, convincing and full of self-belief. He was an arch-networker, focused and determined, a standout even among the MBA types eyeing their next high-paying gig. Lex was also evangelical about a unique-sounding idea for a new business based around providing short-term loans to clients who were backed by invoices from their own suppliers. It was a form of factoring, or supply chain finance, that involved funding short-term loans to clients backed by the invoices they owed their suppliers. What Lex was pitching was a version of the blueprint put together by Robert Cleland and his team at OzEcom and Transaction Risk Mitigation (TRM).
Lex’s potential was not hard to spot – even if he hadn’t gone to the right school. His enthusiasm was infectious, and his supply chain finance idea was potentially a money-spinner, even if it wasn’t quite the winning lottery ticket Lex claimed it would be. His career track was interesting – growing up on the farm, his turbulent time in the Australian start-up scene, the law degree, and his work with the Australian farm producers. His background was not typical, and Lex had to jump through hoops. He met with literally dozens of Morgan Stanley executives and answered hour after hour of questions. He had to impress them all. And he did.
Not only was Lex admitted to the programme, but the super-salesman also secured a few special footnotes to his contract. The high achievers who’d made the cut were put on a strict rotation, spending a few weeks in one department of the bank before being rolled onto another and then another. Lex instead managed to persuade his new bosses to let him work exclusively in a single business unit – the fixed income division, which consisted of a couple of hundred people on the lower floors of Morgan Stanley’s Canary Wharf headquarters. He also got the Morgan Stanley chiefs to agree to let him focus entirely on building up the firm’s trade finance programme. Most of Lex’s new colleagues in fixed income had never heard of supply chain finance. It sounded interesting and small enough to be a very low risk. Senior executives saw it as a kind of low-risk research and development experiment and decided to let the young Australian upstart run with his own project, beavering away with minimal supervision.
Even among the alpha types at the bank, Lex was abnormally hard-working and confident about his own success. Other bankers approvingly talked about Lex the ‘demon’, Lex the ‘psychopath’, possessed by his own ambition, uber-focused and working extraordinarily long hours.
He would make outlandish claims about his SCF experiment, too. ‘We’re going to make billions and billions of pounds,’ Lex told his bosses and colleagues. ‘We’re going to be rich.’
Nobody took the boldest of Lex’s statements too seriously, but the Morgan Stanley chiefs figured that even if he earned the bank a fraction of what he boasted he could deliver, it would be worth it. And given Lex’s drive and self-belief, who would bet against him?
Lex was racing ahead of the other MBA interns. He still had to take part in the same team-building events – trips to cookery schools or to greyhound tracks. When he joined them for social drinks or dinners, he’d never truly let loose like the others. And when the internship programme ended, and the rest of his cohort went back to school to finish their MBAs, Lex stayed on at Morgan Stanley, completing his studies part-time. Soon, Lex was running the trade finance team, known as TReFS, short for Trade Receivable electronic Financing System.
(Several of his Morgan Stanley colleagues later became key members of the Greensill team too. Among them were Roland Hartley-Urquhart and Dave Skirzenski, two US-based Morgan Stanley executives who helped to develop a global client base for TReFS. Jason Austin and Chris Bates, a lawyer Lex knew from business school, were also at Morgan Stanley – Bates shared a flat with Lex in the Isle of Dogs, then a relatively unfashionable area close to the bank’s headquarters in Canary Wharf.)
The team eventually grew to about a dozen people, with Lex as leader. While he continued to meet frequently with David Brierwood – his mentor – Lex’s reporting line was to Jane Guttridge, a tough, New York-based Morgan Stanley veteran. Guttridge’s career had already passed its peak. She mostly left Lex to run with the TReFS business, while acting like a full-time cheerleader for the young Australian in the upper echelons of the bank.
LEX CERTAINLY STOOD out. When he first showed up at Morgan Stanley, as a very junior banker, he handed out his own, home-made business cards. And while most of the desk-bound bankers he worked alongside dressed casually, in chinos and open-collared shirts, Lex turned up in stiff, tight suits. His new colleagues joked that he looked like an undertaker.
A lot of what he wore was bespoke, from a tailor in Cheshire. Increasingly he also eyed Savile Row and Jermyn Street, the homes of high-end tailoring in London where top bankers had their suits cut and fashioned. He talked about buying £1,000 shoes as though no banker was complete without a pair.
Much of Lex’s fashion sense came from a niche, tongue-in-cheek British magazine called Chap, which celebrated conservative styles like tweed and pocket squares. The magazine, and a book called The Chap Manifesto, became famous for a while because the publisher organized street protests when the preppy fast-fashion brand Abercrombie & Fitch planned to move into Savile Row. On weekends in the office, when other bankers would dress down, Lex would still wear a suit and tie. In rare moments of relaxation, usually back at his home in Cheshire, he wore garishly coloured trousers – purple, yellow or pink – and he almost never wore trainers, except when he was running.
His accent changed. Bundaberg drifted into the distant past and he began to acquire the clipped tones of the British upper class. Colleagues were often surprised to find out he was from Australia.
He was also fascinated by the British establishment.
‘One day,’ he told his TReFS team, ‘I’m going to be knighted.’
At work, he had an acute focus on even the most boring details. He would ask specific, technical questions of the staff who worked in accounting or in technology. He wanted to know how the software worked. He wanted to know how TReFS would be accounted for. He was no whizz with computing or software but, compared to most colleagues, he was like a tech visionary in the stuffy Wall Street bank.
The TReFS team sat in a glass office, at one end of a huge floor dedicated to fixed income. Outside, the trading desks were buzzing with row after row of bankers working on mortgage-backed securities and other complicated investments – the alphabet soup of derivatives with acronyms like CDOs and ABCP that blew up when the financial crisis roiled the global economy and sent the financial sector into a tailspin.
Lex’s team was a sideshow, but he was going after the bank’s biggest corporate clients, including household names and big businesses. His pitch was very similar to the OzEcom and TRM blueprint developed by his one-time mentor, Robert Cleland. It went like this: Morgan Stanley’s biggest corporate clients paid their suppliers ninety or 180 days after they submitted an invoice. That meant suppliers were out of pocket for a while, which could put them under some financial strain. The bank would step in and pay suppliers much earlier, but at a discount. The bank would collect the full invoiced amount later and it would fund this programme through the asset-backed commercial paper market – in effect, Lex would convert the clients’ obligation to pay the invoices into securities that in theory could be traded like bonds. The whole thing would be wrapped up with a Morgan Stanley guarantee, and they’d buy credit protection – insurance that pays out if the client defaults on the loan – to hedge against the risk of a default.
The whole programme ran on a privately owned, third-party technology platform called PrimeRevenue that carried out most of the heavy lifting, processing the invoices and matching payments. PrimeRevenue was a relatively tiny tech start-up and Morgan Stanley was a key client for the firm. There was a sort of co-dependency. PrimeRevenue needed Morgan Stanley because the bank was its biggest client. Lex needed PrimeRevenue to make TReFS work. Culturally, though, the two organizations were miles apart, and the laid-back techies mocked Lex for his fake British accent, and his uptight behaviour.
The TReFS team remained small, but Lex acted as though they were already a big deal. He and his team would fly around the world, meeting with top-level executives at major companies in New York, Tokyo, Hong Kong, Sydney. Lex even bragged to colleagues that he might have the highest travel bill of any executive in the company.
TReFS had some success. Kingfisher, the home improvement business, signed up, as did the huge UK supermarket chain Sainsbury’s. Executives there saw the programme – known as ‘Project Perceval’ – as a logical, safe way to provide relatively cheap funding for their small suppliers. Lex even hired a video production crew to film Sainsbury’s trading director Mike Coupe in a stilted, low-fi video touting the benefits to suppliers of ‘improving your cash flow, your liquidity and improving your costs.’ Morgan Stanley then paid to mail out the video on CD-ROM to hundreds of Sainsbury’s suppliers. (A few years later, when Coupe was Sainsbury’s CEO, he was famously caught on camera another time, singing ‘We’re in the money’ while waiting for an interview about a planned merger with one of the store’s rivals.)
Lex told colleagues he was the highest-paid Morgan Stanley associate in the world. Within months, he had been promoted to vice president. Within two years, he told some colleagues he’d been paid a million-pound bonus – incredibly quick even by the then excessive standards of the City.
He talked about changing finance for ever. The young, energetic team he’d forged found it easy to fall in behind the mission. But even at this early stage in Lex’s career, some colleagues were also concerned that Lex’s promises were running ahead of reality. He presented overly ambitious projections that didn’t reflect what they were seeing on the ground in meetings with clients. Lex would frequently tell senior managers that this corporation or that big business was going to sign up to TReFS, when his colleagues knew they’d only held a preliminary meeting. It was wishful thinking. The client might sign up eventually, but Lex presented it with such bravado, with such a bold face, that anyone hearing him would think the deal was as good as done.
He was also proposing deals that were much more complicated than the simple supply chain finance model, relying on multiple layers of default protection or complex structures and funding methods. Often the programmes Lex conjured up fell into an accounting grey area, which appealed to some clients as they could shift debts off their balance sheet.
Still, the business was growing, and Lex’s reputation in the bank was rising with it.
Then disaster hit.
The global financial crisis was borne out of lax mortgage lending in parts of the US, but its impact went around the world. One morning, in summer 2008, the TReFS team showed up to the office and the trading desks that mapped out their floor were more or less empty. Hundreds of fixed income staff found their security cards didn’t work. They had been laid off overnight.
Lex’s team had slipped through the net. He seized the moment. We’re still here because supply chain finance is the future of banking, he said. We’re changing the world. He was like the coach of an underdog sports team, rousing his players for a shot at the title. His mostly young TReFS team was impressed. In the midst of this huge banking crisis, Lex was coming out fighting.
In reality, his optimism was misplaced. A few months after the trading floor had been cleared out, TReFS was effectively finished too. As the crisis raged, a Chicago-based investment management company that ran a crucial part of the TReFS programme – the asset-backed commercial paper conduit – called to say they were pulling out. Their move was swift and decisive. For Morgan Stanley, exiting TReFS wouldn’t be so straightforward. The bank couldn’t just shut the programme off. That would leave some big customers in the lurch. Sainsbury’s had quickly run up close to $1 billion in the TReFS programme, all of it financing the grocery chain’s extensive network of suppliers. The financial crisis had taken on a deeply political flavour, and it would have been impolitic of the US bank to leave a major UK blue-chip company with such a headache. But the bank didn’t want Lex’s SCF loans to land on its balance sheet either – across Wall Street and the City, bankers were trying to shrink their balance sheet lending, not grow it.
Lex found an opportunity amid the meltdown, conjuring a complicated resolution. This involved shifting funds from one of Morgan Stanley’s subsidiaries – a specific type of deposit-taking banking subsidiary known as a Utah Industrial Bank. Banking authorities have strict rules about using customer deposits for investment banking activity, though Lex always insisted that he believed the plan didn’t breach any regulations. He made it work, for a short time at least, and the investment bank was able to tap hundreds of millions of dollars of liquidity, he told colleagues later.
(Much later, a lawyer for Lex and his media spokesperson told me this story wasn’t true. A Morgan Stanley spokesperson denied it too. But then, in an interview with me, Lex said on the record that he had in fact tapped the Utah Industrial Bank for funding and he insisted that there was no breach of any rules. When I went back to Morgan Stanley, the spokesperson again said it never happened.)
By February 2009, Lex’s bosses needed a permanent solution. They launched a sales process and tried to find a buyer for the entire TReFS programme. A pitch deck for the sale was dubbed Project Cloud – a reference to a special purpose vehicle (SPV) called Thunder that had been set up to process the SCF programme. (SPVs are subsidiary companies, frequently used in structured finance, that perform a specific business activity.) The sales deck for Project Cloud said the business at that time had relationships with five clients, and about 500 suppliers, and that there was about $500 million of outstanding loans. The document explained that Thunder, which was sponsored by Morgan Stanley, bought the rights to debts that its clients owed to hundreds of their suppliers. The deck explained the relationship with PrimeRevenue. And it touted the ‘opportunity to acquire [a] high-performing management team.’
There were no takers. Partly, other banks at this stage of the financial crisis had no more appetite than Morgan Stanley for making more loans. They also questioned the idea of buying the programme at all. What were they getting beyond a couple of problematic contracts? Also, what was so special about this management team? And didn’t the technology really belong to PrimeRevenue anyway?
Another proposal came from the Wellcome Trust – a UK-based health charity that is supported by a multibillion-pound foundation. The trust’s top management suggested it could fund the TReFS programme. But it had no expertise or experience of running a supply chain finance programme and ultimately the idea never took hold.
Bigwigs in Morgan Stanley found themselves in talks with UK authorities, including officials from the Bank of England, trying to figure out a solution to this delicate problem. Eventually, the central bank tweaked its own rules so that it could temporarily acquire some of the loans. Another arrangement was brokered: Royal Bank of Scotland, which was then owned by the government, effectively took on the loans to Lex’s former supply chain finance clients in the UK. A similar arrangement saw Bank of America take on the US-based clients of the programme.
After TReFS dissolved, most of the team, including Lex, moved elsewhere.
For Lex, the end of the Morgan Stanley programme was yet another harsh lesson in the fickle nature of finance. His takeaway was that the bank funding model was dangerous. In the event of a crisis, the banks could simply pull away, leaving the whole SCF programme in trouble.
LEX’S FORMER MORGAN Stanley boss, Jane Guttridge, had jumped ship to Citigroup. The US banking behemoth was under the stewardship of CEO Vikram Pandit and his right-hand man John Havens – the two had been running a hedge fund called Old Lane LLC that Citi bought in 2007. Within months of arriving at Citi, Pandit was appointed head of the entire bank as it too faced potential disaster. Citi had stumbled through the financial crisis like many of its peers. But under Pandit’s leadership, it had survived the worst of the crisis and was soon back in hiring mode. Central banks and governments had stopped the bleeding by early 2009 and within months the flood of new money into the economy meant the good times were – sort of – back.
Guttridge, in a jargon-filled interview with a trade publication around this time, said that the appetite among clients for supply chain finance was taking off, ‘driven by the need to improve returns on invested working capital and the search for global operational productivity improvements.’ She hired Lex and several of the old TReFS team to tap into this growing demand.
Lex thought of Citi as the ‘big gorilla’ in the whole trade finance space. Unlike the investment banks that generated most of their revenue from trading and big M&A deals, such as Morgan Stanley, much of Citi’s business involved managing the day-to-day business of its clients, including major corporations. In theory, this would be a dream match-up for Lex, giving him access to billions of dollars in global payments. In practice, the pairing was a mess.
Lex found Citi too bureaucratic, too rigid and too cumbersome to match his ambitions. The bank insisted that he only pitch the SCF programme to existing corporate customers – a vast group, but in Lex’s view only a fraction of the potential market. He was thinking much bigger than that. Lex believed there were lots of smaller suppliers that should get access to SCF, but he had to ignore them because they fell outside Citi’s range.
He clashed with several senior managers, including John Ahearn, the bank’s then head of trade finance. Ahearn, a hard-nosed, tough US banker, had first grown wary of Greensill when Morgan Stanley had pitched him the TReFS business. The two continued to battle as Ahearn tried to keep Greensill within the parameters of Citi’s rules, while Lex skirted round his boss to make his case to other top executives. Lex was particularly close to Havens, then the bank’s chief operating officer, and he told friends and colleagues that Havens’s office door was always open to him. Others perceived this as Lex pulling strings higher up the organization in order to avoid the bank’s normal processes.
Ahearn, who was nominally Lex’s boss, was particularly concerned that Greensill was pitching supply chain finance loans to riskier clients who might not be able to pay them back, and that he was planning to extend repayment terms for much longer periods than was normal. At one point, he said he was going to sign a supply chain finance deal with the Dutch electronics giant Philips. It would be a big win for Citi and for Lex personally. Philips was a huge name. Lex was touted by his cheerleaders for landing it. But the praise soon dissipated. It turned out the deal had been priced as though Citi was lending to the main corporate entity, when actually it was a loan to a Hungarian subsidiary of the firm. That was much less impressive, and the borrower would have had to have been charged a much higher rate for the loan. In the end, the deal didn’t happen.
Lex was also earning a reputation as a lavish spender on the company’s account. Citigroup, whose roots were in banking ordinary retail customers and mundane company accounts, was an entirely different culture to Morgan Stanley. In investment banking, a big expense account was often equated with high achievement – especially prior to the financial crisis. But in a bank like Citi, in the years following the crisis, managers kept a much tighter leash on their staff. Lex’s boasts about having one of the highest American Express bills in the entire bank might have confirmed his lofty status at another bank, but at Citi they went down like a lead balloon.
One incident really stood out. In April 2010, when Lex had been at Citi for just a few months, he travelled to Copenhagen to meet a potential client. His travel plans were unexpectedly disrupted when the Icelandic volcano Eyjafjallajökull spouted ash high across swathes of northern Europe. Thousands of flights across the continent were grounded for days because of concerns the ash might damage their engines. Lex, like the rest of the world, was stuck. Not only that; he had no change of clothes. And he looked set to miss another important meeting back in the UK. Ever resourceful, he rented a car, bought a new suit and shirt, and made his way to the meeting via boat and on land. Despite the chaos and inconvenience, Lex told colleagues that the meeting went well and he won the client over. But when he later submitted an expense claim for about £4,000, mostly for the new emergency wardrobe change, Ahearn – apoplectic – refused to sign it off. That kind of lavish spending was anathema to the stringent management at Citi. When Lex retold the story to colleagues, he relayed it as though it was a kind of badge of honour.
A final straw came a few months later. Lex had managed to get the backing of the UK government for a new supply chain finance programme, run by Citi. The programme would aim to help small and medium businesses in the wake of the financial crisis. The UK government, Lex told his senior executives, had agreed to provide a kind of backstop for Citi’s loans. If the bank needed to offload the loans quickly, the government would take them on. In theory, it sounded like a good proposition. The UK government support reduced Citi’s cost of lending. However, Lex’s bosses were puzzled. The first client to sign up was US grocery giant Walmart. The next client was the US computing business Dell. Why would the UK government support a US bank lending to huge US companies? Lex’s explanation was complex and confusing. It involved swapping dollar transactions into pounds sterling and had no connection to the underlying objective of helping UK businesses. The structure might have been clever, but Lex’s bosses were unimpressed. The whole thing seemed like an embarrassing accident waiting to happen, and in the end, Citi allowed the programme to fizzle out.
DURING HIS TIME at Citi, Lex Greensill also sat on a Bank of England committee on supply chain finance, starting in September 2009, that was looking at ways to get more money into the ‘real’ economy. Two dozen or so interested executives from across the big accounting and law firms, a couple of banks, supply chain technology platforms and insurers gathered once a month, often at London’s Tower 42 office block.
The group was mostly middle managers. Lex usually seemed distracted and underwhelmed, as though the committee was a bit beneath his status. In May 2010, the committee issued a report that concluded the prospects for rapid expansion of SCF were limited – not at all what Lex believed. Funding was still restricted to a handful of banks. Investors either couldn’t put money in, were wary of complex and uncertain regulation, or didn’t see how they could generate a big enough return to make it worthwhile. The findings were unpopular with the SCF fans on the committee – three quarters of the group’s members, including Lex, decided they wouldn’t sign the report.
Lex’s time with Citi was coming to a hasty end. It hadn’t been a roaring success, though he’d been able to continue building out an impressive network of movers and shakers. Most significant among them was Maurice Thompson, renowned in the City and across Europe, who was head of Citigroup’s UK business. Thompson was a fox-hunting aficionado and the High Sheriff of Leicestershire – an office that dates to Saxon times and today involves dressing up in a seventeenth-century uniform of dark velvet coat, breeches, buckled shoes and a sword. His support for Lex in the coming years was critical to the rise of Greensill.
For now, though, Lex’s time with the titans of Wall Street was over. At Morgan Stanley, he had sweated over the business for years and the bank had abruptly ditched it when the financial crisis hit. At Citi, he was squeezed out by senior managers who, in his view, were unable to match his vision. The experience had confirmed that the banks were too slow, too conservative, too narrowly focused on a handful of clients and on maintaining the status quo. They were dinosaurs, waiting to be made extinct by a new breed of financial entrepreneurs playing by a different set of rules.
If Lex was going to become really rich, if he was going to fulfil his ambition to reinvent finance, he would have to do it on his own terms.