In 1970, Merrill Lynch unveiled its bovine corporate symbol with a dramatic TV commercial featuring a thundering herd of long horned cattle stampeding along a beach straight for the camera, concluding with the "Merrill Lynch: Bullish on America" tagline. You could practically feel the floor vibrate when the ad came on the air. Over the years the bull's image evolved, from shots of one carefully making his way through a china shop, to the stylized bull logo seen in most Merrill pro motions today, to the bull in repose in client living rooms and offices in current TV ads promoting the firm's "Total Merrill" campaign.
But the evolution of the corporate symbol is nothing, not when compared to the financial services evolution wrought by a key Merrill Lynch invention of the 1970s: the Cash Management Account. The CMA, still very much around, made waves whose ripples are still being felt in every bank today and in Washington. The ripples show up in the deposit insurance debate, the battle over real-estate brokerage powers for banks, in development of Gramm-Leach-Bliley Act capabilities, the way banks fund themselves today, and more.
This historical impact isn't lost on bankers nor their representatives in Washington.
"The CMA saw explosive growth because it offered such convenience," says Edward Yingling, ABA executive vice-president and long the head of its government relations effort. Back when the Merrill account began, Yingling worked with banks in private practice in Washington. At the time, he notes, the idea of a one-stop account was brand new and required thinking way outside of traditional channels. Yingling says that when one considers the modern period of financial services--which he dates from passage of the Bank Holding Company Act amendments of 1970--the CMA "is one of the top dozen or so events that changed the financial services industry."
The CMA account, Yingling adds, began the process of breaking down the walls of the silos that historically separated the various elements of the financial services business. Along the way, the CMA and other money market funds helped usher in deposit rate deregulation, a sea change for banks that had worked under the restrictions of Regulation Q for decades. The Monetary Control Act of 1980 put the phaseout of rate controls into motion and created a temporary--though often controversial--coalition of federal regulators to oversee the transition.
"Like the NOW account, the CMA was a response to an unmet, almost inchoate consumer need, so that it became a catalyst for change," observes Ed Furash, a veteran banking consultant and analyst and the recently retired chairman of Treasury Bank, N.A., Alexandria, Va. (Treasury is itself representative of financial services evolution, being owned by Countrywide Financial Corp., which began as a mortgage bank.)
Account #1 opened amid skepticism
The CMA came onto the scene quietly, debuting in test markets beginning in late 1977. Merrill executive Thomas Chrystie developed it in secrecy after a consulting firm outlined the possibilities. He later had to justify it to then-chairman Donald T. Regan, who died this June. Regan, who later served as both a Treasury secretary and White House staff chief during the Reagan Administration, was initially skeptical but eventually became the first person to open a CMA, according to a 1987 article in Investor's Daily. ID also noted that in time Regan often was described as the "father" of the CMA.
The initial CMA product, simple by today's standards, was revolutionary for its time. It featured a brokerage account linked to a money market fund into which cash balances were swept to maximize investor returns in a period of high interest rates. The money fund could be drawn on using checks offered by a bank partner--Bank One. The bank partner also offered a linked Visa card. Everything was tied together in a single monthly statement. …