July 18, 2002
Jonathan G. Katz
Securities and Exchange Commission
450 5th Street, N.W.
Washington D.C. 20549-0609
RE: File No. S7-12-01
Dear Mr. Katz,
I am writing on behalf of Northeast Bank, FSB a member of the Maine Banker's Association, in response to the Securities and Exchange Commission's request for comment on the final rule on allowing Credit Unions to offer sweep accounts.
While it is agreed that many federal credit unions offer investment services to their member owners as authorized by law and under the regulatory oversight of the National Credit Union Administration (NCUA) they generally due so under the auspices of an established "service corporation" duly registered as a broker-dealer or as an investment advisor and they do not currently offer sweep accounts.
By definition sweep accounts represent a service that Banks have long since offered to businesses and corporations to manage daily funds and earn interest on available balances whereby funds are invested in a variety of vehicles, repurchase agreements, money market funds, and the like.
Allowing Credit Unions to offer sweep accounts opens the door to additional tax-subsidized competition for commercial banking deposits. Credit Unions were chartered with an entirely different purpose and scope and, therefore they should not be allowed to function in a manner that is similar to that of a Bank, particularly with respect to their ability to offer commercial sweep accounts. Unless the decision is made to tax credit unions, no consideration should be give to expand the powers of credit unions to offer sweep accounts.
Northeast Bank appreciates the opportunity to comment on this subject and to share our views. Should you have any questions or require additional information, please call me or Linda Varrell, Northeast Bank's Sales and Marketing Manager at 1-800-284-5989 ext. 3455.
President and CEO