As a former employee of a broker bought buy a bank, I got a kick out of seeing a broker (MER) buy a regional bank (FRC.) After Glass-Steagall fell, it was popular for banks to acquire regional brokers and to put it mildly, this was a disastrous idea. Here are some other deals to reflect upon -

• Fifth Third - The Ohio Company
• US Bancorp - Piper Jaffray
• Key Bank - McDonald Securities

When these and other unnamed bank / brokerage marriages were announced, there were good intentions. Then the honeymoon was over and a major culture clash between the two businesses became apparent. Banks are product-focused and try to find clients for their products while brokers are client-focused and try to find the best products for their clients. These are two very different concepts and so are the pay scales that caused bankers to be very envious of “overpaid” brokers. After years of trying to bankify the brokers, most of these deals never delivered the synergies that were dreamed about at the onset.

Now we have Merrill buying First Republic and there is a lot of talk about synergies. I seem to remember Charles Schwab having similar goals for its acquisition of US Trust. That experiment failed as well. I am not saying that a bank and brokerage combination cannot work or hasn’t worked. The fact is that most of them have not. Maybe Merrill has the answers?!?

I looked at two competitors to FRC and found that I had changed BPFH to UP this week while leaving PVTB as a DOWN signal. As I wrote on Sunday night (before the announcement), I was surprised by firming in some of the regional banking stocks given the higher interest rate environment. BPFH was one of the charts that had increasing positive volume last week and I cannot help but wonder whether there was a bit of a leak and confusion about which bank was going to be acquired. Regardless, I am very doubtful about the long term results of any similar deal involving banks and brokers.