As the highly geared and financially engineered fall, investors are looking at the country’s pre-eminent team of financial engineers as a guide to what is going to happen next. Macquarie Group wannabes like Allco, MFS, City Pacific, Hedley, Centro, have all run into problems, some terminal, as they seek one way or another to recreate the Macquarie model.

Last year on 14 November when Macquarie Group proudly announced that its loan facility had been “upsized to $A9b due to oversubscriptions” from $A8 billion, the share price was above $75.

Yesterday the debt was still there and the share price was $47, which is also less than half the all-time peak of $98.6 reached last May when it was Macquarie Bank Ltd. At yesterday’s close the group was valued at $12.9 billion. The shares plunged to a low of $44.20 this morning as the broader market fell more than 2%. They then recovered slightly to trade around $45.38 at 10.30am, down $1.62.

The bank has let Macquarie Fortress, its thinly capitalised long leverage play, all but collapse and this week it revealed it was exiting one of the businesses it was a founding player of: non bank mortgage origination and funding. That decision takes effect from today.

Macquarie has seemingly bunkered down: perhaps it’s waiting for asset values to stabilise. It had already cut back its aggressive deals in the back half of 2007, especially from 1 October and the start of the second half of its financial year.

So far Macquarie, along with US giants Goldman Sachs and perhaps Lehman Bros and Deutsche Bank of Germany, have largely escaped the impact of the subprime and US housing mess. But the impact of the credit crunch and the attack on highly leveraged companies and their inventors is another thing.

Which hasn’t stopped Macquarie doing a big deal in the troubled US financial markets overnight.

It has agreed to buy a majority stake in Allegiance Investment Management LLC to increase fixed-income assets by $US4.5 billion. Terms weren’t disclosed.

Allegiance is based in California and sells fixed-income investments to pension funds and individuals through financial advisers and brokers. The firm will be renamed Macquarie Allegiance Capital LLC and Macquarie doesn’t expect to cut jobs after the transaction is completed, probably in the second quarter.