Stock Research – Wall Street makes FORTUNE sweeping YOUR CASH admin, July 12, 2024 What was most interesting however is that we always referred to ourselves as “The Bank”. It’s a strange term when you consider that we were never licensed as a bank by the appropriate federal agencies. Nevertheless, on Wall Street when people were talking about their own specific firms, they always internally talked about “The Bank”. The reason for this term is quite simple and appropriate. Years ago, if you wanted to know or https://npfinancials.com.au/how much money a brokerage firm made all you had to do was calculate interest earned versus interest expense, and you basically had the bottom line, give or take a bit on a pretax basis. When I was s Senior Accountant with Arthur Andersen in the early 1970’s, this calculation was always appropriate, and we dominated banking and finance type companies at that time. Recently after all these decades it looks like the same technique applies today that applied back then. Most individuals and institutions are still not making the interest they should be making, on the funds they have deposited with brokerage firms. They need to keep a better eye on their funds. The whole issue is the concept of IDLE CASH, and what is being done with it. Back in the late 70’s, Merrill Lynch led the industry with the development of what they called the CMA account which stood for Cash Management Account. The objective was to go up against the banks both commercial, as well as savings and loan and fight for the cash. What the brokerage firms are doing now is sweeping your idle cash from your accounts on a daily basis and paying you interest on that dollar amount. What are the brokerage firms paying? The answer is probably as little as they possibly can. Recently I saw rates on the order of 1.5%. What happens is that at the end of the day, the firm checks to see what idle cash is available in your account. It then sweeps the cash and pays you 1. 5% on the balance or less. Meanwhile the Uncategorized