Stephan Newhouse disappeared this week. When Philip Purcell, Morgan Stanley's chief executive, announced the appointment of two co-presidents to try to bring order to the strife-torn investment bank, Mr Newhouse was not mentioned. This was tactless, given that Mr Newhouse was still listed on Wednesday on Morgan Stanley's internet site as its president.

No more, it seems. Mr Newhouse was airbrushed from the Morgan Stanley presidency in the brutal manner that has characterised Mr Purcell's tenure. His exit follows those of John Mack, who became president when Morgan Stanley was taken over by Mr Purcell's retail broking firm Dean Witter Discover in 1997, and Robert Scott, who succeeded Mr Mack in the job.

We should not feel too sorry for Mr Newhouse. For one thing, he is not short of a bob or two: his annual pay and bonus tended to run into eight figures. More pertinently, Mr Newhouse is an investment banker who has made a living by advising companies to merge with each other. There is karma in the fact that he has been undone by his employer's own failed corporate union.

"If our two firms can't get this kind of thing right, it says something about our ability to help our clients," Dick Fisher, Morgan Stanley's former chairman, remarked at the time of the merger. How true. Morgan Stanley never fully bonded with Dean Witter, as the rebellion against Mr Purcell by a group of former executives including Mr Scott has demonstrated.

Of course, as a McKinsey alumnus, Mr Purcell is aware of the merger failure rate. The consultancy estimates that only 12 per cent of merged corporations grow revenues at above the rate of other companies in the same industry, while up to 40 per cent fail to achieve promised cost savings. In other words, they mostly might as well not have bothered.

For an unfortunate group of merged companies, of which Morgan Stanley is now a member, it is even worse than that. The merger sets off a prolonged culture clash between the two sides that destabilises the merged company. That is what happened to AOL's merger with Time Warner and there is a long history of it on Wall Street, going back to Shearson's 1984 acquisition of Lehman Brothers.

There is a particular danger of this when a growth company with a high share price uses its paper currency to acquire a well-established and staid name. AOL did so when it merged with Time Warner and Mr Purcell pulled off a similar trick with Morgan Stanley as Dean Witter benefitted from a rapid growth in mutual funds.

All the talk, both in finance and publishing, was of how valuable content could be distributed more widely and profitably over a new distribution network. In Time Warner's case, AOL was supposed to bring new opportunities to sell its magazine stories, music and films over the internet. It did not take long before the internet bubble burst and AOL ceased to be a growth business.

Similarly, Dean Witter was expected to bring to Morgan Stanley a new way to exploit its securities expertise, its preferential access to initial public offerings and its analysts' share tips. A combination of the market downturn and Eliot Spitzer, who demonstrated the perils of exposing Main Street investors to the wiles of Wall Street, brought that to an end.

Shareholders in such mergers do well if they are prescient enough to sell on inflated expectations as soon as the deal goes through. For those that keep their stakes, disappointment ensues as it becomes clear that the expected revenues are not going to materialise. Investors in Morgan Stanley have watched other Wall Street banks do better in the past few years.

Psychologically, life is even worse for executives from the old-established side of the merged company. When the smoke clears, it is painfully apparent that they have ceded control over a venerable entity to a bunch of upstarts. At Time Warner, the resulting anger led to an old guard counter-revolution in which Dick Parsons was installed as chairman and chief executive.

Properties on Wall Street do not come more venerable than Morgan Stanley. It may have been overtaken by Goldman Sachs recently but it was the original white-shoe Wall Street brokerage. It even used to have its own typeface on the "tombstone" advertisements listing the investment banks that had underwritten bond issues. For years, it refused to share the role of lead underwriter.

Add to this the fact that the disaffected former Morgan Stanley executives were not only members of its management but remain shareholders and it is easy to see why they have such a sense of amour propre about Mr Purcell. Despite his unsentimental treatment of anybody who does not demonstrate loyalty, his chances of fending off his critics indefinitely appear slim.

The rebels are probably right that Morgan Stanley needs a new leader. As long as Mr Purcell is in charge, he is likely to cling obstinately to the original vision of an integrated retail and institutional investment bank. Furthermore, if he cannot win the loyalty of Morgan Stanley's bankers after eight years - and his repeated purges suggest not - he is not likely to pull it off in future.

Still, my sympathy is limited. If anyone is to blame for over-promoting of mergers and acquisitions, it is investment bankers. Not only did Morgan Stanley's bankers walk into the Dean Witter deal with eyes open but the rebels accumulated much of their wealth at a bank that advocated many similar mergers. If Mr Purcell has made them a little poorer, there is some justice in that.

john.gapper@ft.com