Bad betting on subprime mortgages has hurled America’s financial markets into disarray, but the physical endurance the young Merrill demonstrated in his first year at Amherst seems to have foreshadowed his company’s ability to withstand the toughest times in its 96-year history, even if it now means selling itself to Bank of America.
Reeling from its $45 billion loss in faulty mortgage investments, Merrill Lynch, the storied Wall Street innovator and largest stock brokerage in the world, decided to cut its losses on Sunday and accepted a $50.3 billion buy-out from Bank of America. Despite this takeover, the Merrill Lynch name—and the company’s popular bull logo that has come to encapsulate its characteristically optimistic outlook—will presumably live on in the newly formed Merrill Lynch Wealth Management subdivision, which will look to combine Bank of America’s smaller team of financial advisors with Merrill Lynch’s “herd” of 17,000 advisors.
But at Amherst, no matter what happens in the market, the Merrill legacy will persist in the science building bearing the Merrill name, -- enduring recognition of the man who brought Wall Street to Main Street.
“[Merrill] has pioneered almost every new idea which has come to Wall Street in the last quarter of a century,” wrote Homer H. Shannon in a 1947 Forbes Magazine profile. “He has been the most convincing spokesman Wall Street has had with respect to our system of free enterprise of a free capital market … A master salesman and keen student of economics, Merrill has outguessed the best. More than any other individual, he has made Wall Street what it is today.”
The son of a country doctor who also owned a village pharmacy in his native Green Cove Springs, Florida, Merrill gained his first commercial experience working behind his family store’s counter. While of modest financial means, Merrill’s parents managed to send him north to prep school at Worcester Academy before he entered Amherst, where he formed lasting friendships with his Chi Psi fraternity brothers and worked in a department store to pay the bills. But Merrill left after two years to attend University of Michigan Law School, either because of lack of academic motivation or want of funds, as conflicting accounts indicate. Law was not for Merrill either, so after stints editing a West Palm Beach newspaper and playing semi-professional baseball, Merrill moved to New York where he worked in bond sales at various companies before starting his own Charles E. Merrill & Co. with over $2,000 in personal savings.
Originally a traditional bond and stock brokerage, Merrill soon ventured into investment banking and, perhaps most significantly, underwrote Safeway Stores in 1926, a profitable gamble that would develop into the largest supermarket chain and a long tradition of Merrill investments in various chain stores. But as the roaring 1920s came to a close, Merrill anticipated a crash and urged fellow Amherst alum President Calvin Coolidge (class of 1895) to admonish speculators, advice to which he never heeded. Nevertheless, Merrill liquidated his company’s portfolio before it was too late and his cautious counsel reportedly saved his clients $6,000,000.
Champion of the Common Man
As the stock market rejuvenated, Merrill Lynch boomed and merged with several other investment banks. But Merrill was not satisfied with Wall Street’s status as the bastion of the rich and sought to put the stock market in the hands of all Americans, not just the elite few. Merrill commissioned the journalist Elmo Roper to survey the average American’s feelings towards the New York Stock Exchange. “In substance, Mr. and Mrs. America thought Wall Street was a name for the home of the nation’s most accomplished crooks,” Shannon summarized of the Roper Reports’ findings. Others thought the term “stock market” denoted a place where cattle are sold.
Acting on his newfound calling to bring America’s economy back to the common man, Merrill eliminated his company’s service charges in 1940 and further expanded its operation to small, local outposts throughout the country. Merrill Lynch’s financial advisors would provide free information about stock market basics and explain its platform of low-risk investments that were affordable to middle class America.
“Demystification had been the key to [my father’s] great success,” wrote James Merrill ’47, the Pulitzer Prize-winning poet, in his own memoir.
Not purely altruistic, Merrill realized he could tap new capital by facilitating investments from the middle class. While investment profits may have declined per investor, they surely added up. Targeting what Merrill once called “the 33-year-old veteran with a wife and children, a small home and mortgage and a $5,000-a-year job,” Merrill Lynch soared.
Merrill Lynch also had more partners than any other financial services firm, further evidence of Merrill’s commitment to giving the American public a stake in the country’s economy. “American business and industrial management is not doing effective work in educating its own personnel in the economic foundations that underlie the American way of life,” Merrill once said. “Too few organizations have given their workers a tangible stake in the success of the business or made them feel individually important.”
What was officially “Merrill Lynch, Pierce, Fenner & Beene” additionally carried the nickname of “We, the People,” in reference to its extraordinary number of partners, but also to the way the firm helped democratize the stock market by promoting interest in investing by expanding investor education, access and affordability.
“If America is not to go the way of much of Europe, the mass of the people must realize their economic stake in our present system, must find in it the opportunity and emotional outlet that people abroad think they see in a socialist state,” Merrill said. “The perils we face from ignorance and misunderstanding can be more serious than those we faced in war.”
Bullish on Amherst
Although Merrill never graduated from Amherst, he remained a close friend of the College and became one of its largest benefactors, donating over $1,500,000 over the course of his life. Some of these bequests bore the Merrill touch.
Merrill stipulated, for example, that returns on a $100,000 gift to the College be used as financial aid for students strong in only one subject. “I reasoned that the students smart in everything get a whack at the scholarships offered for general excellency,” he explained. “But many a boy who is a cracker jack at chemistry or engineering has no chance for financial aid because of medium ability to absorb history or a foreign language.”
Merrill also allocated $300,000 to construct comfortable and affordable apartment housing for the youngest members of Amherst’s faculty. “It is my intention that this building [which became the Merrill apartments] be an investment in human beings—not just in bricks and mortar,” he said.
Other gifts included endowed professorships and money for the establishment of the Merrill Center for Economics, to be run under Amherst’s supervision at The Orchards, Merrill’s Southampton, N.Y home.
As Merrill was bullish on Amherst, Amherst was equally admirable of Merrill’s work and long tradition of service to the College. In recognition of his accomplishments, the College awarded him two honorary degrees throughout his life. When he conferred Merrill’s honorary Master of Arts in 1935, President Stanley King proclaimed, “Your alma mater recalls you today with affection to make you her son in recognition of the large number of indigent young men of hopeful piety for whom you have opened the doors of Amherst.” As President Charles Cole gave Merrill his honorary Doctor of Laws in 1948, he summarized, “By your faith in the importance of research and your belief in the full disclosure of all information, you have given the public renewed confidence in the integrity of those who deal in stocks, bonds and commodities.”
Upon Merrill’s October 6, 1956 death, $2,000,000 of his $5,500,000 trust went to Amherst. Additionally, two percent of Merrill Lynch’s profits would go to the College for the following five years.
After 96 years, Merrill Lynch’s glory might have finally faded, but—as perhaps Merrill would have done, recognizing the potential for greater losses—it compromised, bit the bullet and sold. Recall, for example, Merrill’s 1928 advice to clients in anticipation of the 1929 stock market crash:
“Now is the time to get out of debt. We think you should know that, with a few exceptions, all the larger companies financed by us today have no funded debt. This is not the result of luck but of carefully considered plans on the part of their management and ourselves to place these companies in an impregnable position. The advice that we have given important corporations can be followed to advantage all classes of investors. We do not urge you to sell securities indiscriminately, but we advise you in no uncertain terms that you take advantage of present high prices and put your own financial house in order. We recommend that you sell enough securities to lighten your obligations, or better yet, pay them entirely,” Merrill wrote.
At times like these, what would Merrill have done?