Growth of Goliath

The one-year-old firm of Merrill Lynch, E. A. Pierce & Cassatt (TIME, Feb. 12, 1940) is to Wall Street what General Motors is to the auto industry. Last week it became Wall Street's General Motors-Ford Corp., by announcing a merger (effective in mid-August) with the second largest U.S. brokerage and commission house, Fenner & Beane.

Merrill Lynch, Pierce, Fenner & Beane* will have a combined capital of $6,000,000, an annual gross income of over $10,000,000, debit balances of $56,000,000, 93 offices in 91 cities, 50,000 active accounts, membership in 28 separate commodity and security exchanges. By Wall Street standards, this is gargantuan.

Number 1 Partner Charles Edward Merrill once consulted an alienist because his bearish outlook on the booming 1928 market was so unusual as to make him doubt his own sanity. One of his few companion pessimists was Calvin Coolidge, who dourly observed to him that when a stock sold at 100 and paid 2% it either had to start paying 4% or go to 50. (After that remark, Merrill tried to take Coolidge into partnership.) But nobody suggested last week that Charlie Merrill should seek mental therapy again. His firm has grown from 120 to 1,800 employes in two years, and he is avowedly out to mass-merchandise securities.

Of Fenner & Beane's offices in 54 cities, only 12 competed with Merrill Lynch's 49. Its cotton brokerage business (once largest in the country) will bolster Merrill Lynch's own commodity business, which last year contributed 17% of its gross-commission income and more than that in gross profit. Fenner & Beane's brokerage business includes some 20,000 accounts, is contributing almost half ($25,000,000) of the new firm's total debit balances in margin accounts.

Another urgent reason for this grandiose merger: to cut overhead. Like most Wall Streeters, neither firm made money last year, although each is slightly in the black for 1941. The estimated savings from combined operations will be $1,000,000 a year. If the new firm can carry some of that over to net, Wall Street's Goliath may even become as profitable as a pint-sized manufacturing corporation.

* The venerable Cassatt name, potent in Pennsylvania, will be kept alive there on the new firm's letterhead as the "Cassatt Division."

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