Sunday's New York Post contained a brief entitled, "Is Charles Schwab taking advantage of sweep account customers?" It contained a letter to business columnist John Crudele, which said, "Dear John: Charles Schwab is trying to pocket the spread between the higher rates for Treasury bills and the lower rate offered by Bank Sweep products. A 'valued customer' gets 15 basis points in a sweep product instead of the 1.23 percent offered by the US Treasury money fund. Yes, I receive FDIC insurance. However, this guarantee is secured by the good faith and security of the US government. I think T-bills offer a similar guarantee. Shame on Schwab! You pocket basis points against billions of dollars of customer accounts. Anonymous." He responds, "Dear Anonymous: The first thing I'm curious about is, why didn't you give your name? I only use initials in this column, so I guess you are afraid that Schwab will know which of their 'valued customers' has a gripe. So I figure you didn't complain to Schwab yourself, and you let me do your dirty work. OK, I'm up for it. Here's what Schwab had to say: 'Hi John, Thanks for contacting us and for the opportunity to respond to your reader's note regarding cash solutions at Schwab. We believe cash plays an important role in any sound portfolio and that clients should have access to a wide range of cash options,' wrote a spokesman. Then he says you have your cash in the wrong product." Schwab writes, "Clients should rarely leave money they intend to retain in cash for long periods of time in any sweep vehicle -- whether it is a sweep money market fund or a bank sweep feature. Long-term cash should typically be invested in a purchased money-market fund for liquidity or in FDIC-insured certificates of deposit.... By comparison, purchased money-market funds will generally pay higher interest yields than any sweep vehicle. Ultimately, the choice of where to put uninvested cash is up to each client." Crudele adds, "So there you are. And I guess Schwab really is pocketing the point spread between what you are invested in and what government bills are paying. Luckily for them, people often make this kind of mistake and are afraid to ask."

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