The market has bounced back on the coat-tails of a Wall Street bounce this morning but there was one notable exception — Macquarie Fortress Notes.

Macquarie Bank itself recovered $2.19 of yesterday’s $8.80 drop to reach $75.89 by late morning, but Macquarie Fortress notes followed yesterday’s 25% dive to fall another 6c to 51c in morning trade.

The implications of Monday’s Fortress bombshell are still sinking. The bank hasn’t exactly covered itself in glory with a clear bunker mentality as regards communications that still sees no formal statement to the market outlining any other potential exposures across its vast empire that is saddled with debts of somewhere between $120 billion and $150 billion.

By way of contrast, Babcock & Brown responded to yesterday’s 11% caning with this reassuring statement that helped lift its shares 80c to $25.80 this morning.

I suggested yesterday that Macquarie Bank itself should have helped refinance the $1.3 billion debt in the two embattled Fortress funds to avoid the firesale of performing bonds which has led to the possible $300 million loss.

It has been pointed out that prudential regulator APRA has been crawling all over the Macquarie model in recent months and one clear condition of the funds is that the bank is restricted from launching a bail out if things go wrong.

That said, you would have thought the Macquarie network could have bought time before the banking syndicate pulled the rug on Fortress.

One bizarre element in all this is the way Macquarie Fortress was still conducting a buyback as recently as 20 July, when this notice revealed they’d borrowed an additional $1.2 million the previous day to buy its own notes.

Surely, the sub-prime crisis was well-known two weeks ago and the buyback should have been suspended earlier given the fund’s 600% gearing ratio, which triggered the recent firesale of securities.

One party watching all this smugly is proxy adviser ISS, which urged Macquarie shareholders to reject its remuneration report because too much of the bonuses are paid in cash based on short term performance.

The executive team would certainly be sharing a lot more of the pain with their shareholders if they’d taken post-earnings scrip bonuses as the stock peaked at $96, rather than hundreds of millions in cold hard cash.

Let’s hope more than a handful of the millionaires were in there buying up big yesterday.