No bank levy could recoup the enormous debt Nic Moore’s Macquarie owes the Aussie tax payer

It was great to see that Macquarie Group chief executive, Nicholas Moore, managed to keep a straight face as he told a Senate committee on Friday that the government should exclude the investment bank from paying Scott Morrison‘s bank levy. This was based on the argument that it was such a minor player in the domestic market.

“Macquarie Bank has less than 2 per cent market share in the domestic mortgage market, less than 2.5 per cent in deposits, less than 2 per cent of Australian lending and advances, and less than 1.5 per cent of the credit card market,” he told the committee.


We should be exempt: Bank executive

Find out why the head of the Macquarie Group Nicholas Moore says the bank shouldn’t be subjected to the Turnbull government’s bank levy.

“Macquarie Bank is therefore not a major bank as normally understood and therefore we think it should not be subject to the levy.”

Let’s remember what this levy actually is: a payment to tax payers in recognition of the fact that these five banks operate with a rolled gold guarantee that we will bail them out if trouble hits.

Not convinced? Let’s give a little refresher on exactly what happened during the GFC.

When Lehman Bros went bust in 2008, all that relentless talk by Macquarie about the need to let market forces operate unencumbered by government red tape was thrown out the window in favour of a relentless campaign of lobbying Canberra for protection.

Short sellers could smell blood, and Macquarie was lined up as Australia’s Lehman. A perception of insolvency tends to be self-fulfilling for any financial institution – just ask Babcock & Brown.

What came next for Macquarie and the Big Four banks was a platinum-class government rescue of the sector. Prime Minister Kevin Rudd stepped in a guaranteed the banks wholesale funding. It means the banks got to borrow the tax payer’s AAA credit rating when they went borrowing on the global market.

More importantly for Macquarie, the corporate cops (ASIC) banned the short-selling of Australian banks.

A rapacious financial buccaneer like Macquarie would probably think nothing of using short selling against other corporate entities in similarly dire circumstances, but here was our corporate cop ensuring no one could threaten Macquarie with these tactics.

The story does not end there. What good is a government guarantee of your wholesale funding if you can’t turn a buck from it.

My CBD predecessor, Michael Evans, detailed just how adept Macquarie was at ensuring the guarantee was transformed into a very lucrative business for the investment bank.

The guarantee did not just ensure these banks, like Macquarie, could raise money offshore at a time when it was extraordinarily difficult to get funding without government backing – it meant the bank could raise money cheaply.

Through its Corporate and Asset Finance (CAF) division, Macquarie deployed this funding to snap up financial bargains that were being offloaded by desperate corporations which did not have this guarantee.

In one year, CAF’s profits surged from $66 million to $264 million.

Macquarie borrowed more than $16 billion under the guarantee – which is more than Big Four bank NAB.

Keep that in mind next time Macquarie argues for an exemption from the levy which is expected to raise about $50 million after tax from Macquarie, according to Moore.

Being Frank

Let’s forget these half-arsed local honours that have been getting handed out so freely this year. Shopping centre billionaire, Frank Lowy, bagged himself a proper gong over the weekend when he was made a Knight Bachelor in the Queen’s Birthday Honours List in the UK.

It’s great to see that all is forgiven with regards to the silly misunderstanding back in 2002 when Lowy authorised substantial payments to Lord Levy, British Prime Minister Tony Blair‘s “special envoy to the Middle East”.

Westfield paid Levy something like £250,000 over three years to help with its grand expansion plans in the UK.

“He was retained by and reported to our corporate head office in Sydney to advise on the UK retail market, to flesh out the shape of that market, and to identify business opportunities,” Westfield said at the time.

Levy was a former pop-music impresario who became a major fund raiser to Blair’s Labour government and was also a close friend to Blair.

As one MP said at the time Levy appeared to be “simultaneously a quasi-minister, [British] Labour Party fundraiser and consultant to a company seeking to influence government policy”.

Westfield denied the allegation.

Follow CBD on Twitter. Got a tip? ckruger@fairfaxmedia.com.au

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