(Image: AAP/Dan Himbrechts)

Macquarie Group held its second straight virtual AGM yesterday and it turned into a three hour marathon — with the board peppered by more than 50 shareholder and proxy questions. 

While GetUp activists dominated the live questions, asked via teleconference and focusing on climate, fracking and Indigenous issues, I lobbed 19 written questions during the meeting, all of which were read out in full by Macquarie personnel hand-picked for their strong voices.

Based on the following exchange, we now know that federal taxpayers have lent the “millionaire factory” $11.3 billion in cheap loans to help get it through the COVID pandemic? After further inquiries, we also know the interest rate: $9.5 billion loan for 3 years at 0.1%; the rest at 0.25%.

My first question: “When COVID first hit, the [Reserve Bank of Australia] slashed interest rates to zero, started lending cheaply to banks and committed to unprecedented money printing by buying $5 billion of federal and state government bonds a week, which has led to purchases exceeding $200 billion. Please summarise the impact and involvement of Macquarie in all of this. How much have we effectively borrowed from the RBA and have we been active participants in buying up the record amounts of federal bonds being issued to fund programs such as JobKeeper?

Chairman Peter Warne turned the microphone over to chief financial officer Alex Harvey.

“Like all ADIs [authorised deposit-taking institutions] in the market, obviously, when COVID-19 first hit last year we moved very quickly to provide significant support to our retail and our business customers” he said. “We saw the outcome of that through the growth in our portfolio last year with our mortgage business up 29%, and our small and medium enterprise lending business up 13% for the year, so we saw the support that the group had provided to customers over the course of the last 12 months.

“Using the formula offered by the RBA, the RBA obviously did extend the term financing facility [TFF] as a way to make sure the financial market was liquid to provide that credit and Macquarie, as one of the ADIs in the market … As we said at our full year results in March, our initial allocation of the TFF was $1.7 billion. We’ve now drawn down an additional $9.5 billion…”

In total, Harvey said, Macquarie had drawn “$11.3 billion of TFF, and we have been able to put that money to work into the economy to support our retail and our business clients”.

“Obviously we do have, as part of our cash and liquid management, we do invest some of that cash and liquids into high quality securities like government bonds.”

Is this how Australian-style money printing works? The RBA creates money out of thin air, lends it to our banks and they use this money to both keep the economy solvent and buy up the avalanche of government bonds that are being issued as federal debt hurtles towards $1 trillion?

Given that the COVID crisis has largely passed for Macquarie’s mortgage customers — repayment holidays have crashed from 13% to less than 1% of its rapidly growing $71 billion portfolio — the main reason now for the RBA loans appear to be to on-lend the money to fund the budget deficit, through the purchase of state and federal government bonds.

Macquarie is capitalised at $58 billion and was gloating yesterday that it had $8.4 billion of surplus capital. So why does it need an $11.3 billion loan from the RBA?

There were some other interesting exchanges at the AGM, giving some further insight into the financial relations between Macquarie and Canberra

On the JobKeeper question, CEO Shemara Wikramanayake seemed very proud of the fact that neither Macquarie, nor any of the companies it controls in Australia, got into the widely rorted scheme. And when asked about how much the Turnbull government’s much-hated bank levy — targeting the big four banks plus Macquarie — was costing the millionaire factory, Walker fessed up that it was now $80 million a year.

Another highlight included Wikramanayake explaining why she had lunch with old university pal and ex-AMP chief Boe Pahari last August — an exchange which generated an item in today’s AFR Rear Window column.

It also gave us a chance to see other directors drawn into the debate, with risk committee chair and former RBA governor Glenn Stevens forced to explain what the board was doing after the Australian Prudential Regulation Authority imposed a $500 million capital penalty on the bank for shoddy practices. The Australian latched onto that element of yesterday’s debate.