Time for Macquarie to imbue its explanation on Storm margins with a little compassion

Macquarie Bank's managing director, Richard Sheppard, must have had a lot on his mind when he signed the covering letter to Macquarie Group's submission to the parliamentary inquiry investigating Storm Financial.

It is hard to imagine a conservative, cautious and well-respected banker such as Mr Sheppard putting his name anywhere near the document if he had been given the full information necessary to judge its contents.

As revelations about Storm Financial's collapse continue - its founder, Emmanuel Cassimatis, is due to appear before a publicly funded examination in Brisbane today - it now appears bank processes were lamentably inadequate when they lent money to many Storm clients.

And there is evidence to suggest Macquarie Bank's processes with its margin loans were just as bad as everyone else's.

How else can Macquarie explain margin loans of remarkable size made to people in a number of conditions not generally associated with a younger demographic: retirees, pensioners, widows and a woman now suffering dementia?

It is these people who were caught out when the market plunged last year.

An active and compassionate concern for them and their plight is not to be seen in the 400 words Macquarie spends in its submission addressing "Macquarie Investment Lending's association with Storm Financial".

Indeed, a reader could well gain the impression everything was tickety-boo when it came to Macquarie's relationship with Storm, particularly in those dark days of sharp market falls.

On Macquarie's official version, it swung into action and made margin calls, first to Storm, then to its borrowers directly.

"This response from Macquarie Investment Lending ensured that all affected clients were made aware of their margin call obligations, and were in a position to take action in a timely manner," the submission states.

As BusinessDay reports today, Storm's victims tell a different story. We asked five questions of more than 50 Storm Financial clients with Macquarie margin loans who had contacted the newspaper and received 30 responses, some 5 per cent of the estimated 600 Storm Financial clients who received margin loans.

From them, 19 said they received no margin call from Macquarie at all.

The alleged lack of contact with 19 former Macquarie clients suggests the official version's blanket assertion about the success of Macquarie's margin loan systems is just not right.

Indeed, it suggests the Storm vortex that meant many Commonwealth Bank margin calls were never received by borrowers was repeated in Macquarie's calls to Storm clients.

The 30 respondents say they were sold out by Macquarie at an average loan-to-value ratio of 96.7 per cent, well above Macquarie's stated maximum level of 80 per cent.

(Being sold out at these levels is a disaster for investors: they were left with an average 3.3 per cent of their total investment portfolio rather than 20 per cent if they had been sold out at the 80 per cent level.)

Again, the survey results suggest Macquarie's processes did not work.

It would be a good thing if Mr Sheppard dusted off his copy of the submission and thought seriously about what he has put his signature to.

The submission does not pay proper respect to those people who have lost their homes after being caught up in a system that was not of their making.

And Macquarie was part of that system, actively aiding and abetting Storm's delusions as Macquarie lent profligately to people it simply should have refused.

Many of those former Storm Financial clients want to understand what went wrong, and how they were caught up.

A frank account by Macquarie of its failings would be a sign of respect for those hurt by what obviously went wrong.

Such frankness occurs all too rarely in corporate life, so an alternative would be if the parliamentary inquiry were to add Mr Sheppard to its list of witnesses.

There's going to be precious little justice out of Storm Financial's collapse.

Having Mr Sheppard explain why Macquarie's systems failed just might give the current generation of younger bankers a reason to rethink their exuberance the next time a boom comes around.

It might also give some comfort to the family members of the poor woman suffering dementia that their complaints have been heard.