ALERT - banking "SWEEP ACCOUNTS" : LUSENET : TimeBomb 2000 (Y2000) : One Thread

Before I post the excerpt from another forum, I will say that I have NOT verified this information. I've been up for 20 hours now, and was set to call it an evening, when I checked into North's forum and spied this post.

I normally don't post anything without verifying, but this could be too important to wait on. I'm going to fight off falling asleep here in the chair (again) and see if there is anything to back this up on the net (such as was the case for the "Know Your Neighbor" proposed-policy).

Warning! Warning! Sweep Accounts Reduce Your Funds for Cash Withdrawal Purposes Comment: Pay very close attention to your bank statements. Be on the lookout for notification of a policy called the sweep account. The sweep account authorizes your bank automatically to sweep excess funds in your checking account into a savings account. All the bank must do is notify you. The bank moves your funds from an account that pays no interest into one that does. Yes, your bank wants to pay you money. Great, isn't it? Those bankers -- always the charitable ones. What's the catch? The bank can wait 7 days before allowing you to withdraw cash from an interest-bearing account. Ah, as they say, ha! This was notification sent by a large New York City bank.

Eye opener, ....if it pans out to be on the up-and-up.

Mr. K
****wearily looking at the clock ...****

-- Mr. Kennedy (tshtf@midnight.dong), March 21, 1999


I saw the "sweep accounts" posting on Gary North's web site yesterday, and sent him the following email last night:



Just saw your posting about the bank "sweep" technique, and would like to add a couple of items for your consideration.

First, this has been around for a while. When Jennifer was doing research for the banking chapter in the first edition of our Time Bomb 2000 book in the summer of 1997, she stumbled upon it. As far as she could tell, its primary purpose was not to slow down the withdrawal of money by depositors, but rather to put the money into a category of account that has a lower Fed reserve requirement -- i.e., so the bank can loan out an even larger percentage of your monies! Indeed, some banks are using this technique to go so far out on a limb that they need an artificial intelligence (AI) program to predict just how much cash they'll REALLY need, on a day-to-day basis, to satisfy the withdrawal demands by customers.

Lest you think that this is restricted to just one or two banks, let me quote, verbatim, the language on page 19 of the Bank of America document entitled "Personal Schedule of Fees, Deposit Agreement and Disclosures" sent to all customers in New Mexico in March 1999. On the cover of the booklet is the language, "This brochure will govern all personal deposit accounts originally established with Bank of America NTS&A or one of its predecessors. By maintaining your account with Bank of America after April 8, 1999, you agree to the terms of the services, agreements and disclosures."

The brochure was sent as part of a large marketing package that heralds the operational reality of the merger of BA and NationsBank; the brochure is 35 pages long, in 6-point type, and I doubt if one person out of a thousand actually reads any of it. Here's the key language on page 19:

*********************************verbatim quote************************ ******

"12. Internal accounting of balances -- No effect on your account. Your checking account will consist of two (2) "Sub- Accounts" on the books of the Bank: (1) either a demand deposit (noninterest-bearing) or a NOW account (interest-bearing) and (2) a savings deposit, as those terms are defined under federal law. The two will be treated as a single account for customer use, and you will see no effect.

"All deposits and other credits will be posted to, and checks and debits will be deducted from, the demand deposit or NOW account. Whenever the demand deposit of NOW account balance exceeds a "threshold amount" (which we may establish and change at our discretion), we may transfer funds above that amount to the savings deposit. As these funds are needed to pay items presented against your checking account, the appropriate amount will be transferred back to the demand deposit or NOW account, up to six (6) times per statement cycle. If a sixth transfer is needed, the entire balance of the savings deposit will be transferred into the demand deposit or NOW account. This process may be repeated each month.

"For interest-bearing checking accounts, we will pay the same rate of interest on balances in both sub-accounts as described in Section 11 above and in our current Schedule of Fees. Your periodic statement will show a single annual percentage yield earned on the combined balances."

*********************************verbatim quote************************ ******

The last paragraph is interesting, because it does not describe what the bank will do about interest payments if the "main" account is NOT an interest-bearing checking account. My interpretation of the language is that NO interest will be paid on the savings-sub-account in such a case. But I also interpret the end of the first paragraph -- "you will see no effect" -- as a plausible argument that the withdrawal restrictions on the main checking account won't be affected by the fact that some of the money is temporarily swept into a savings-sub-account. Of course, I'm not sure if either of these interpretations is correct; for all I know, they're amended or qualified by some other 6-point language elsewhere in the brochure. If I wasn't already anticipating this kind of language, and if it really was a life-or-death issue as to whether I could withdraw my money (my money! my own money!) from the bank on demand, I would have to get a competent lawyer to read through the whole brochure and tell me what it really means.

There is an entire section of the brochure, "Regulatory Disclosures: When funds are available for withdrawal" that's mostly boilerplate, but has some interesting language in subsection d, "Other delays may apply", on page 24:

*********************************verbatim quote************************ ******

"In addition, funds you deposit by check may be delayed for a longer period under the following circumstances:

"We will notify you if we delay your ability to withdraw funds for any of these reasons, and we will tell you when the funds will be available. They will generally be available no later than the eleventh day after the day of your deposit."

*********************************verbatim quote************************ ******

I hardly need to point out to you that the word "emergency" is not defined precisely, but merely illustrated by way of two very interesting examples. Also note that there is no guarantee that the funds will be available after the 11th business day...

On the very bottom of the back cover of the booklet is the code (also in 6-point type) "C-NM 4/99". I suppose that it's theoretically possible that Bank of America decided to impose these restrictions only upon the good citizens of New Mexico ... but somehow, I have the feeling that the same fundamental language applies to all customers throughout the United States.

I asked a bank representative at a BA branch in Santa Fe whether the referencer to "emergencies" was something new that had been added to this new edition of the brochure; he stated very confidently that the same language had been in previous versions of the brochure, though he could not find a copy of an old brochure to show me. However, this was not an 18 year old illiterate bank teller with no experience, but a reasonably articulate middle-aged bank representative who sits at one of those desks where they open new accounts and handle other such things...

Since the BA document is in the public domain, and since there is no visible copyright notice on either the first few pages or the back cover, I don't think there's any problem if you want to publish this on your forum.

Sincerely, Ed Yourdon


I then sent a short follow-up note to him:



Here's a brief quote from page 195 of the second edition of our Time Bomb 2000 book re sweeps:

"In other words, banks are sweeping money out of accounts from which checks are paid and funds are withdrawn, to accounts that cannot readily have funds withdrawn, and that are not subject to reserve requirements. This practice is permitted by the Federal Reserve as long as the number of transfers per month is limited. It thus permits banks, as a practical matter, to carry fewer reserves than the 10 percent required by law. This practice is used more than we might have thought: Our source at Carreker Antinori [a software company that provides the AI determination of how much cash the banks really do need] informed us that mt of the top 200 banks use this process, and that approximately $80 billion has been "restructured" using this process. We find this alarming, given the potential problems banks face entering the new millennium."



Bottom line: this has been around for a while. In some cases, the banks may be providing some benefits to the customer by paying interest on the monies swept into the savings sub-account, but from the research we did, it seems pretty evident that its primary purpose is (and has been for some time) to circumvent the reserve requirements that would otherwise apply.

By the way, many stock-brokerage accounts work the same way. I think it was Merrill Lynch that pioneered this approach when the introduced their "CMA" (Cash Management Account) concept about ten years ago.


-- Ed Yourdon (, March 21, 1999.

Found plenty about sweep accounts on infoseek. Seems as if this has been a fairly beneficial tactic for commercial bankers for many years. Banks would allow the business to set a threshold for the checking account. Excess over the checking balance would be "swept" into the savings account (to draw interest). Checking balance below the threshold causes savings to be put back into checking to maintain the threshold balance.

When this banking tactic became available for regular bank customers has not been found yet. It would have been advantageous, I would presume, in the less combustible times, but this type of system could be used to consumers disadvantage during this period. It just depends on how the "threshold" is handled and a couple of other factors.

I'm just about comatose, so I'll be looking at this subject with interest after some rejuvination.

Mr. K

-- Mr. K (asleep@the.wheel), March 21, 1999.

Found plenty about sweep accounts on infoseek. Seems as if this has been a fairly beneficial tactic for commercial businesses (not bankers) for many years

Link to infoseek search results on "sweep accounts": INFOSEEK SEARCH RESULTS - SWEEP ACCOUNTS

MR. K ***leaving now before he falls on something sharp***

-- Mr. K (asleep@the.wheel), March 21, 1999.

Hi Mr. K, you and me both zzzzz. last post for the night :-|

A cryptic "Notice" appeared on my latest checking account statement:

This notice is for informational purposes only. No action is required. To more effectively manage the bank's reserve requirements, each checking account includes a savings subaccount. The subaccount will be completely transparent to you and will not affect any aspect of your relationship with the bank, including your account balances, statements, interest earned on accounts or the way we process checks. If you have any questions, please contact us.

I called the bank. When I finally got a supervisor who could answer me, she told me that the notice was a mistake and never should have been printed on the account statement, and to ignore it.

Curiouser and curiouser....

-- Debbie (, March 21, 1999.


That is identical to a message printed on a bank statement I just received from Wells Fargo yesterday. Is that who your bank is? I intended to call them Monday and ask what this is about.

-- Wanda (, March 21, 1999.

Debbie: I think the bank manager was lying to you. If it were never intended to be put on there why is it there? You only have a "verbal," comment from the manager to ignore it. Better check into it and maybe consider getting rid of your checking account now and learn to use cash only. It's a good feeling not to have to write checks, reconcile a checkbook, and keep track of ATM transactions.

-- bardou (, March 21, 1999.

It's a good feeling not to have to write checks, reconcile a checkbook, and keep track of ATM transactions.

'gday mates. 3 1/2 hrs. sleep....gotta' go ta church, so I'm back up. I feel like there is a toothbrush in my skull.

Well, I find it hard to ignore this particular thread/issue until there is a clarification, even though I don't "Bank" anymore -- haven't since January. I agree with the - "get used to using cash" statement! (for more than 20 reasons and growing)

I also agree that is it very suspicious, that a bank manager would say that a notice printed on the statement was a mistake and to ignore it. That makes no sense.

This is from the Wells Fargo site:

PRODUCT SUITE Wells Fargo's Credit Sweep Account You will spend more of your time managing the business of your company, and less time managing your cash and borrowing needs, with the Wells Fargo Credit Sweep Account. By integrating into a single account the borrowing, investment, funds transfer and business checking function for your company, the Wells Fargo Credit Sweep Account seeks to optimize your day-to-day cash management

The Credit Sweep Account automatically keeps your business checking account at the pre-determined target balance levels, pays down or advances fund from your line of credit to meet day-to-day cash needs, and moves any excess funds to a taxable money market mutual fund.

[:-o]{--posters comment--mr.k

Time spent managing your cash position is reduced and you are available to pursue other business activities. You also have the option of tailoring the Sweep Account to solely transfer funds to and from your line of credit. if you choose this option and later find that you would like to invest in the Overland Sweep Fund, this feature can easily be added.

This is on http://www.wellsfa

Mr. Yourdon - do you have any information on this topic?

- thanking you in advance...- Mr. Kennedy

Thanks for the play-by-play with the bank manager. I'm really interested in this topic.

Mr. K
***bleary eyed, but very curious (I'll snap out of it, where's the gallon of coffee?...)***

-- Mr. Kennedy (tshtf@midnight.dong), March 21, 1999.

Sorry yall

Mr. K

-- fuzzy Kennedy (notsurprised@the.mistake), March 21, 1999.

Here is what I have found on the Wells Fargo Site. I now realize that Wells Fargo is far more into "stocks" and trading than I had previously known. This angle on their banking business certainly gives them more motive to want to implement the "sweep accounts" across the board. A LOT more motive

The full press release on: ress/press980803

    August 3, 1998
Also rolls out full-service brokerage centers in 20 cities across the West SAN FRANCISCO - In a move to provide its customers with one-stop shopping for all their financial services, Wells Fargo Securities, the broker/dealer subsidiary of Wells Fargo Bank, rolls out WellsTrade, which provides trading on the Internet for a flat fee of $29.95. Clients can make trades, secure real-time quotes, and check their account balances 24 hours a day, either over the Internet at or by touch-tone phone. WellsTrade is a great benefit for Wells Fargo's more than 470,000 Online Banking customers who will now have the option to use the internet to access their brokerage portfolio, view transaction history and trade online. WellsTrade provides easy access to a wide range of investment products including stocks, bonds, options, IRAs and more than 4,000 mutual funds, including 1,000 no-load funds. Company research and news via Zacks and News Alert is also available. An online demo of the WellsTrade capabilities is available at the personal investing section of Wells Fargo's web site.

The full press release on: ress/press980803

I highly recommend combing through these press releases. They wind up telling more than they should, most times (If you know what I mean ;-)

Mr. K
****is still looking****

-- Mr. Kennedy (tshtf@midnight.dong), March 21, 1999.

This just gets better and better. This press release was dated only 2 months ago: /press/press990126-b/


SAN FRANCISCO--Wells Fargo & Company's Board of Directors voted today to authorize the company to acquire, from time to time, up to eight million shares of Wells Fargo common stock. The company has approximately 1.644 billion shares outstanding.

The shares, to be purchased at market price, are part of Wells Fargo & Company's systematic pattern of common stock repurchases to meet the periodic common stock issuance requirements for Wells Fargo's benefit plans and other stock issuance requirements, including acquisitions accounted for as purchases.

Wells Fargo & Company is a $202 billion diversified financial services company providing banking, insurance, investments, mortgage and consumer finance through 5,895 stores and other distribution channels across North America.

Now....the plot thickens! Certainly are some strange coincidences and investment strategies going on with W.F.!

Mr. K
***whose coming back late tonight - ta ta***

-- Mr. Kennedy (tshts@midnight.dong), March 21, 1999.

Ed, thank you *very much* for taking the time, thought, energy to post this! BA has gone thru so many changes ... they are arrogant now, swept up in $$ manipulation past good sense -- they don't see it as *our* money anymore. Certainly not the only bank infected with "our customers are fodder for our schemes" canker.

By now, all signs and indications point to a repeat history of various malignant epochs accumulated from this burnt-out century. Time to ACT and stop looking for buds of hope that everything will continue "normal." Every other entity is deciding what's "best" for us within *their* own best interest, and to survive one must take the reins now and self-determine one's direction.

Ed, thank you! Please keep this topic updated on this thread, if possible. Favorite-itting now to keep checking ... ;-)

Ashton & Leska in Cascadia, almost disengaged from "the system"

xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx xxxxxxx

-- Ashton & Leska in Cascadia (, March 21, 1999.

I had quite an experience at Wells Fargo this weekend. I recieved a cashout check from a 401K. I went to WF to cash it, the girl said no problem, laid out the money and stamped the back of my check with their mark. Then she asked if I had an account with them and I said no, which is when she wanted my fingerprint which I adamantly refused, arguing with them about it, called the manager over etc. Finally she seemed to acquiesce that she would give me a cashiers check, which would seem to invalidate their position of requiring a fingerprint to process a check from a non-customer. By then I said Forget it, or words to that effect. I got the impression that they wernt going to part with cash no matter what.

Now Im off to a casino, Ill splash some Wild Turkey on my lapel, stumble up tp the money window and slur C-Caannn Yoouuu cash this for my vacc-aaation, Id like  uup twenties please, uup , scuse me

-- Foster Brooks (, March 21, 1999.

WHEW!!!! Good morning, Mr. K. 5 hrs. myself. Thank you so much, Ed. Eye-opening isn't it?

Wanda, yes my account is Wells Fargo. I don't keep much money in it anyway. It always goes in and goes right out again. At some certain paycheck the music will stop however and I don't want to be the one that can't sit down. But I am at a loss to answer the question "how do you not have a bank account?" (Bardou?) Are you not dealing with any bank now in order to buy the money orders with your paycheck, in order to pay bills? I would think it would be difficult to do this at any bank where you have no account. Maybe the solution is to have a checking account (i.e. be a customer) but just keep the balance as small as you can, ready for when the music stops.

-- Debbie (, March 21, 1999.

If they "sweep" into a money market fund, what kind? Probably not FDIC "insured" like the checking account or a regular savings account.

-- A (, March 21, 1999.

Whoa, y'all have been busy. Thank you so much Mr. K for your tireless research on this matter. And, thank you Ed for your clarification.

Debbie, I have both my personal and business bank accounts with WF. Like you, I am keeping a minimal amount in the personal account, but cannot see any way to operate a business without a more substantial amount in that account. It is a dilemma. Wells has made me feel uncomfortable more than a few times lately. Their automated customer service phone system has been giving me fits for several months. And, it was a bit of a jolt early this month when their on-line banking system had that message about the transactions from March 3rd not being available for viewing. Finally, similar to Foster's message above, twice in the past 4 weeks my local branch has made it more difficult for me to make a withdrawal. That's a great analogy about Musical Chairs. I don't know if Wells' problems have been in any way related to Y2k issues, but, maybe rather than the music coming to a sudden stop, there are several scratches in the record that will cause it to skip unpredictably.

-- Wanda (, March 21, 1999.

Mr. Yourdon, as always...applause is called for.

I ran across the post last night in the bleary part of the evening, and wanted to search much more, but we can only fight off sleep so long....

I couldn't agree more Ashton & Leska, this Sweep Account topic is one to stay abreast of. I certainly will try to help. I had a feeling this was something Mr. Yourdon would be able to help identify and discuss. Since I have lent out my book to others (It stays gone from my house), I didn't specifically recall it had been discussed in the book. Apologies.

Mr. K

-- Mr. Kennedy (, March 22, 1999.

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