Macquarie Bank shares today suffered their biggest ever fall after embarrassing revelations about investor losses in a fund that has been hit by the contagion engulfing the US structured credit market.

This was the carefully worded statement by Macquarie Fortress that caused the blow-out.

Units in the fund (ASX code MFNHA) tumbled to a low of 57c and by late morning were still down a massive 14c to 61c as investors ponder whether the bank will be one of the “certain selected investors” who might step in to prevent a fire-sale of what appears to be perfectly performing corporate bonds.

Macquarie Bank shares were at one point down $6.50 or 7.9 % when they hit a low of $75.99 and by late morning they had only stabilised to $76.80 – still a loss of $1.5 billion in market capitalisation after confidence in the bank’s invincibility was shaken.

Whilst the recent gloat at the AGM about having no exposure to the US sub-prime market is strictly true, a highly leveraged exposure to the broader US corporate debt market has now come a cropper with investors in Macquarie Fortis staring at losses of up to $300 million.

Since when has a bond fund that has suffered no defaults gone into a tailspin? Since it was highly geared in an environment of easy credit that suddenly suffered a shock. You have to wonder why Macquarie Bank didn’t just step in provide some bridging finance to prevent the paper losses being crystallised because the reputational damage from a Macquarie fund going into meltdown will be substantial.

The Australian newspaper gave the Millionaire’s Factory a thorough going over today (see business lead) in what is partly motivated by pay back over its ongoing defamation battle, but the front page write-off was justified given this morning’s market mauling.

Heaven forbid, Michael West even breathlessly reported that Betheny McLean, the Fortune reporter who first questioned Enron and then went on to write the book about its failure, is turning her attention to Australia’s most famous financial export.

After the James Chanos and Edward Chancellor attacks on Macquarie a few weeks back, the bank revealed that it has $98 billion of debt across its 107 global infrastructure assets, which are geared to an average of 58%.

However, they have been wise indeed about locking in the fruits of easy credit because $43 billion of this huge debt pile is locked in through fixed rates or hedging for a period exceeding 7 years. That’s called brilliant risk management given what is unfolding now – but it clearly wasn’t applied to Macquarie Fortress.

Disclosure: The author bought 780 units in Macquarie Fortress this morning at 69c each and added a further 9 shares in Macquarie Bank at $76.65.