[oostevo]

Key paragraph (from the original FT article):

> The issue has arisen from idle cash sitting in customer accounts at brokerage firms and large banks, which “sweep” otherwise uninvested funds into interest-bearing alternatives in order to generate income. The SEC is looking into whether the firms steered those clients into sweep accounts that paid little or no interest, and whether the financial advisers at those groups had a fiduciary duty to advise clients they could make higher returns if they moved their cash into other accounts.

[Animats]

Yes. Before brokerages were part of banks, cash in a brokerage account was usually stored in a money-market fund, with whatever interest money market funds were paying. Once merging with a bank, cash was swept into an in-house bank account.

This didn't matter much when money market funds were paying near zero interest. But the zero interest rate era is over. Except for demand deposits in banks, which pay well below money market rates. Often near zero.

That's what's going on here.

It's a conflict of interest created by the end of Glass-Stegall, which kept brokerages and banks apart.

[reaperducer]

My parents instilled in me a mild distrust of banks. It's for this reason that I get my statements mailed to me each month, and each month I reconcile what's on the paper with what's in my spreadsheet.

Guess what? Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors.

When I've told people this in the past, I've been dismissed with "Oh, I use Venmo instead of a bank, so it's always right," or "Oh, it's too hard to figure so that out."

I simply don't understand people who blindly accept what an app or web site tells them about something as important as their own money.

I know they don't teach balancing a checking account in high school anymore, but you should be able to add and subtract to get through life.

No, the computer is not always right.

[beaglesss]

Unless you hold a lot of money, you're at the mercy of someone actually caring to fix it, and if not an annoying and possibly expensive lawsuit

It's not I trust the bank, its just the times they've stolen under $500 from me they've more or less said 'fuck you deal with it' and after that I can just work to make the cash back a lot easier than I can sue for it. So I just closed my accounts and did that.

Fighting the banks over chump change sounds nice in theory or if you can start a class action but if not it's kind of like suing the cops, basically a wild goose errand for anyone but someone with a lot of time and a pro bono lawyer.

[pc86]

Somewhat related story about banks just saying "fuck you deal with it."

I left a subscription and long story short I got charged an extra $119, which was the monthly fee at the time. I reached out to the business over and over again and eventually they just said they were not refunding it unless I came back as a recurring customer, which I wasn't interested in doing. I submitted a charge back, submitting all my supporting information that the charge was extraneous beyond what I had agreed to pay, and eventually after a few months the bank (Discover) agreed with me and claimed the chargeback was settled.

Fast forward nearly a year later and boom a $119 charge pops up on my card. Discover tells me that the retailer had appealed (a process I was never notified about and didn't get a chance to respond to), that they accepted the appeal and the decision was final.

The wrinkle in this is that at the time I was in the process of digging out of a high five figures in credit card debt and this card had a ~$25k balance month to month so they were getting about $600/mo in interest from me. I called a manager and said "I have been paying this off at the rate of $2-3k/mo and plan on continuing to do so if you reverse that charge, otherwise I'm transferring the balance to another card and the interest ends today."

For whatever reason they were totally willing to throw that money away over $119, so I transferred the balance and closed the account. It is totally believable to me that they would do more or less the same thing with stealing money from cash accounts, if not intentionally then at least negligently and not taking the time to properly investigate.

[reaperducer]

Unless you hold a lot of money, you're at the mercy of someone actually caring to fix it, and if not an annoying and possibly expensive lawsuit

My experience has been the exact opposite.

Even for errors under a dollar, even big banks like Chase and Bank of America have fallen all over themselves to fix things immediately.

[ryandrake]

Most of the mistakes I see are things like restaurants charging more than what was on the bill, and if you paid with a credit card, these are usually very easy to dispute. From actual banks, I haven't seen any problems, and yes I check whether the interest and dividend payouts are correct--they always are.

The article here is about banks defaulting customers to low-yield sweep accounts, but it doesn't look like they are actually under-paying interest. The accounts just don't pay a lot of interest. Honestly, the customer should know how much interest their sweep account pays and move that money to higher interest accounts if that's important to them. Whenever I put cash in a brokerage that I'm not going to use for a while, I always take the time to move it from the cash sweep account to an interest-bearing account. Buyer beware!

[mrmetanoia]

Yeah, it's a bit of a war of attrition.

[mhb]

What kind of mistakes are these? I've been reconciling my bank statements for decades and if it doesn't balance, it's been my mistake.

[welder]

He just uses a crap bank.

[smallmancontrov]

Crap banks abound.

[ang_cire]

And some are very big, too.

[educasean]

I see it less as an issue of blind trust and more of an opportunity cost I guess. While it does raise my blood pressure that banks can slip in these little mistakes that almost always favor them, I don't see myself ever investing as much time and effort as you did to verify the numbers every month.

Maybe once these AI agents get reliable enough, it might be a fun side project to automate the verification process.

[saghm]

> Every year I find a mistake in at least one bank statement. And it's always in the bank's favor. Sometimes it's a few cents, but once it was a few hundred dollars across multiple errors.

How much time have you spent on this overall compared to the amount of money you saved by noticing these errors? I certainly don't think it's fair for banks to get away with this, but I'm not convinced that tracking things at that level of detail would be worth it for most people

[pan69]

How do we know that banks are making these errors if no one checks? It might be a few bucks on your account here and there but if that happens over millions of customers... That's a nice little scheme for banks to get away with.

[saghm]

We don't, unless they take a large enough mount that someone notices anyways. To me, that's more an argument that there should be more regulation here (Glass-Steagall was mentioned in another comment, which doesn't directly address this specific issue but it helps address perverse incentives in general) than the idea that people should have to spend time on this. Given how vital banks are to modern life and the number of purchases that an average household would need to check against each month, this seems like a case where the common good is better served by holistic changes than telling people "just do the work yourself". I'm politically more on the left than the average person though, so obviously opinions here will differ.

[sowbug]

Startup idea: we audit your financial accounts for you. Do a Plaid-style link, and we take it from there. Charge whatever antivirus subscriptions cost.

Of course the startup also charges banks to find errors in the customers' favor.

[felipemnoa]

I'm really curious to know what type of bank errors you are talking about. If they are true errors then they should not be biased either way. i.e. sometimes they would be biased on your favor. But if they are always biased in their favor then maybe they are not really errors?

[jancsika]

Dollars to donuts you've spent more in your own time reconciling than you've recovered in bank errors.

[foobarian]

So it seems that over multiple years and considerable hours spent on this chore, the payout was a few hundred dollars? Assuming it was corrected? That's not a great cost/benefit ratio.