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Walt Bettinger comes out swinging during analysts' call, and shares pop, on assurances Schwab can ride out gale force interest rate pressure on its balance sheet

The Schwab CEO deflected blame, promised to stay 'conservative,' and left Wall Street analysts wondering why Schwab won't dump bonds and offer better rates for client sweep cash

Author Lisa Shidler April 18, 2023 at 3:01 AM
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Walter Bettinger: 'Our franchise strength and financial model remain very much intact.'
Brooke Southall and Keith Girard contributed to the editing of this article.

Walt Bettinger

Brian Murphy

Brian Murphy

April 18, 2023 — 5:22 PM
Low interest yields on investment, checking and savings accounts held at banks are going to be the straw that breaks the backs of more than one institution in the not too distant future. Watch. Schwab may, or may not, come through it unscathed - but to be honest the outcome is up to the behavior of their clients, not their own actions. We, like many investment advisors, are actively moving client funds to optimize their cash harvest. This will be a growing trend that will wreak havoc among the financial institutions that have long taken advantage of their clientele. The Fed has instituted policies that have benefited the banks immensely over the past few years. Look no further than the IORB rate that allows banks to currently earn 4.9% on their excess reserves. As of April 12, 2023 the depository institution reserves held on the Fed's balance sheet was a whopping $3.35 Trillion - which implies that the Fed is paying financial institutions at a rate of about $165 Billion a year. And yet banks pay their depositors 0.45%to 0.65% annually? The IORB is a direct transfer of money from taxpayers to financial institutions - Bank of America, Wells Fargo, JPM, Schwab, etc...and it's ludicrous. Of course, select money market funds are also taking advantage of the IORB...and paying that interest back to shareholders. Expect money held in these specific money market funds to grow (and inflation to remain an ongoing concern) as long as the Fed continues this ridiculous policy. So, it's up to astute advisors to do the right thing for their clients.

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