Regan Blasts Merrill Lynch Management : Former Treasury Secretary Calls Firm Fat, Suggests Takeover

Having taken his potshots at the White House, former Treasury Secretary Donald T. Regan is now zinging Merrill Lynch & Co., the giant investment firm he headed during its rapid growth in the 1970s.

In the June 20 issue of Fortune magazine, Regan blasts the current management at Merrill Lynch and suggests that the company be taken over.

“How long does it take to get your act together?” Regan asked. “You guys have had over three years.”

The three-year period refers to William A. Schreyer’s tenure as chief executive of the firm. Schreyer added the job of Merrill Lynch chairman to that of chief executive in June, 1984, succeeding Roger Birk, who had followed Regan in the top job.

Costs Became Problem

Merrill Lynch said Wednesday that it was surprised and disappointed by some of the statements attributed to Regan.

“Perhaps they reflect the fact that (Regan has) been away from business for eight years--a period marked by dramatic and complex changes,” Merrill Lynch spokesman Fred Yager said. “We believe Merrill Lynch is well positioned for the near- and long-term future.”

Regan quit Merrill Lynch to become Treasury Secretary in 1980 and became White House chief of staff in 1985. He left the Reagan Administration last year and recently published a book highly critical of President Reagan and his wife, Nancy.

Now head of Regdon & Associates, an investment firm based in Alexandria, Va., Regan asserts in the Fortune article that Merrill Lynch’s costs went out of control under Birk.

“Some of the people under Roger got a little too headstrong and a little fat and lazy,” Regan said. “Merrill was not exactly run in a Spartan manner. Eventually costs became a problem. They (management) got too used to limousines and perks.”

As for Merrill Lynch’s direction under Schreyer, Regan takes issue with management’s approach of investing for the long term.

“You don’t have the luxury of the long term,” he said. “It’s a cold, cruel world out there. After all, would Merrill recommend to its customers that they buy the securities of a company whose business isn’t improving?”

As with its Wall Street competitors, Merrill Lynch has been buffeted by heightened competition in financial services and the aftermath of the stock market crash. Its first-quarter profit of $68.3 million was off 37% from a year earlier, while its 1987 earnings of $390.6 million dropped 14% from 1986.

Competitive Edge

Regan argued that Merrill Lynch should be taken over by a commercial bank or some other big financial services company to cope if deregulation ever allows banks to compete in the brokerage business.

“It would give the firm a hell of a competitive edge in servicing the full range of corporations’ financial needs,” he asserted. “Merrill is not smart enough to start lending money de novo. “

Regan cited Morgan Guaranty Trust Co. and General Motors Acceptance Corp., the auto maker’s financial arm, as prospective buyers.