UC-NRLF $B 37 3M7 Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/clearinghousesthOOcannrich > or THE ^i UNIVERSITY califobS^ ENTRANCE TO THE LONDON CLEARING HOUSE. CLEARING-HOUSES THEIR HISTORY, METHODS AND ADMINISTRATION BY JAMES G. CANNON Vice-President of the Fourth National Bank of the City of New Yoric ^ OF THE r JNIVERSIT^ ^SfjCALIFOP^ NEW YORK D. APPLETON AND COMPANY 1900 ^Q Copyright, 1900. by JAMES G. CANNON NEW YORK ^ z^ ^' TROW DIRECTORY PRINTING AND BOOKBINDINQ COMPANY HEW YORK THIS BOOK IS AFFECTIONATELY DEDICATED TO MY MOTHER 82901 PREFACE When attempting some time since to make an in- vestigation regarding some matters connected with the New York Clearing-house, I discovered, greatly to my surprise, that there was no book which gave, in suc- cinct form, a history of the clearing-houses of the United States or a description of their methods. There have been many articles published separately in magazines and newspapers on some of the more notable clearing- houses, but no attempt appears to have been made to incorporate in one volume comprehensive data regard- ing the different institutions of this character that are in operation in the large cities of the nation. A knowledge of the workings of these organizations is of great importance to the banker of the present day. Accordingly, I resolved that if it were a possible thing to do, I would gather together such information of this kind as might seem to be of interest to the banker and the student of finance and publish the same in a form to serve as a convenient reference. A banker's life is a busy one, but in such time as I have been able to devote to the work, I have collected the material upon which this volume is based. It has been my effort to make the work as complete and accurate as possible. The chapters on the more important clearing-houses have been submitted to those VI PREFACE identified with their administration for criticism. A sharp lookout has been maintained for any modifications of established rules since the manuscript was begun. It is not supposed, however, that the book goes forth with- out errors and omissions. I hope that such of these as may be found to exist will prove to be unimportant in character and of such a nature that they can be readily corrected in a future edition. In view of the increase in the attention given to eco- nomic subjects, and even practical financial methods, in our colleges, it is hoped that this book may prove of use to instructors and in some cases to students. I take this occasion to express my deep appreciation of the valuable services rendered to me by many of my banking friends throughout the country. I am espe- cially indebted to Mr. Thomas Coleman, who, under my direction, visited a large number of clearing-houses and procured much of the data incorporated in the chapters following. I am also profoundly grateful for the very serviceable aid given me by Mr. William Sherer, Man- ager of the New York Clearing-house; Mr. W. D. C. Street, Manager of the Chicago Clearing-house; Mr. C. A. Ruggles, Manager of the Boston Clearing-house, and Mr. T. A. Stoddard, Manager of the St. Louis Clear- ing-house, and many others. If this volume adds anything to the knowledge of my banking friends on the interesting and important subject of which it treats, I shall feel amply repaid for the time and efforts that have been expended upon its production. J. G. C. 20 Nassau Street, New York. TABLE OF CONTENTS I. Classes of Clearing-Houses. A Clearing-house Defined — Clearing-houses Classified with Respect to Functions — Clearing-houses Classified with Respect to the Funds Used in Settlements . . i II. Clearing-House Terms. How Usages Differ — The Meaning of " To Clear " — Clearings — Exchange and Exchanges — Bills and Bills of Exchange — Draft and Check — Accounts Balanced and Balances in Accounts — Collections — Items — Clear- ing-matter — Settlements — Out-of-town Checks and Country Checks 3 III. Special Functions of a Clearing-House. Primary Object — Extension of Field — List of Special Functions — Action of Clearing-house Banks at Out- break of the Civil War — Mutual Assistance of Members — Fixing Rates of Interest on Deposits — The Practice in Sioux City — Establishing Rates of Exchange — Some Buffalo History — Rochester — Baltimore^Houston — To- ledo — Topeka — St. Louis — Denver — West Superior — St. Joseph — Clearing-house Loan Certificates . .11 IV. Possible Developments of the Clearing-House System. New Functions to be Exercised — Country Checks — Trans- fer of Currency from Point to Point — Possible Use of Gold Certificates — Special Examiners — Settlement of Balances — Advantages of the Cash Basis — Clearing- house Depositories — The Use of Depository Certificates 23 V. The Administration of Clearing-Houses. List of Officials — Duties of Officers — Committees — An- nual Meetings — Plan of Administration in Canada — Duties of Officers and Committees .... 28 viii TABLE OF CONTENTS PAGE VI. The Settlement of Clearing-House Balances. Results Accomplished by Settlements — Ratio of Bal- ances to Clearings — Settlements with Money — Clear- ing-house Settlements in Canada — Money in Labelled Packages — Objections to Silver — Methods of Settling Balances Without Money — Advantages of the Man- ager's Check Over Settlements in Cash . . -35 VIL Clearing-House Exchanges. Location of Clearing-houses — Arrangement of Furni- ture — Hour of Making Exchanges — Clearing Matter — Character of Indorsements — Messengers and Set- tling Clerks — Conducting the Exchanges — Determin- ing Balances — Two Clearings a Day — Detroit Plan of Handling Collections 47 VIII. Clearing Country Checks. The Growing Use of Checks — The Small Percentage of Actual Money Used in Business — The Difficulty of Country Checks — Remedies Proposed — State and Na- tional Clearing-houses — The Long Island Experiment — The Success at Sedalia, Mo 62 IX. Typical Journey of a Country Check Remitted for a City Account. The Small Amount of Work Required of Payer and Payee — The Large Amount of Work Required of the Bank in which the Check is Deposited and Its Cor- respondent — What the Receiving Bank Does — What its Regular Correspondent in the City Nearest the Country Bank is Required to do — What the Coun- try Bank has to do — An Illustrative Example . . 68 X. Clearing-House Loan Certificates. What Clearing-house Loan Certificates Are — Origin — Interest Rates — Uses — First Issue in i860 — The Is- sues of 1861, 1863, and 1864 — Action of Various Clear- ing-houses in 1873 — New Orleans in 1879 — New York in 1884 — Action of the New York, Boston, and Phila- delphia Clearing-house Associations in 1890 — General TABLE OF CONTENTS ix PAGE Resort to Loan Certificates in 1893 — Emergency Cir- culation in the South — Boston and Philadelphia in 1895 — New Orleans in 1896 — Calculations of Interest 79 XL-The New York Clearing-House. Origin and Early History — Formal Organization in 1853 — First Location — New York Clearing-house Building Company — Cedar Street Property — Consti- tutional Provisions — Committees — Statistics of Mem- bership — Clearing for Non-members — Statements of Condition — Capitalization of New York Banks — Records of Clearing-house 127 XIL Daily Routine of the New York Clearing-House. The Clearing-room — Clerks and Messengers — The Manager's Part — How the Exchanges are Made — The Cash Balance Paid in — The Disbursements — Clearing-house Gold Depository — Restrictive In- dorsements — Pro Rating of Expenses — Record of Fines — Table of Annual Clearings — Table of Aver- age Daily Balances 175 XIII. The Clearing-House Association of the Banks of Philadelphia. Early History — Runners' Exchange — The Morning Exchange — Gold Depository — Clearing-house Due- bills — Settlements without the Use of Money — Com- parison of Bank Statements — Collateral Security — Assessment of Expenses — Admission of New Mem- bers — Plan of Administration — List of Presidents — Failures and Resulting Litigation . . . .209 XIV. The Boston Clearing-House. Formation and Early History — Period of the Civil War — Settlement of Balances — Borrowing and Loaning Balances — Clearing for Outside Banks . . . 228 XV. Foreign Department of the Boston Clearing-House. Organization and History— Regulations— Two Clear- ing Hours — Blanks and Forms — Fines — Book-keep- ing 246 TABLE OF CONTENTS XVI. The Chicago Clearing-House, Date and History of Formation — Methods of Exchange — Preliminary Exchanges amortg Members — Kinds of Money Employed in Settling Balances — Trading Balances — Non-member Banks that Clear — State- ments of Condition — Expenses and Fines — Admis- sions and Expulsions — Volume of Clearings — Ad- ministration 263 XVII. The St. Louis Clearing-House. Early History — Scope of Membership — Plan of Admin- istration — Management of Clearings — Records Kept by the Manager 285 XVHL Canadian Clearing-Houses. The Banking and Currency System of the Dominion of Canada — Limitations of Canadian Clearing- houses — Form of Government — Routine of Ex- changes — How Members in Default are Dealt with —Monthly Statements to the Minister of Finance- Records of Clearing-house Transactions . . . 297 XIX. The London Clearing-House. Early History — Stimulated by the Example of New York — " Out-clearers " and " In-clearers " — Morn- ing Clearings and Afternoon Clearings — The Final Balance— Detail of Methods 321 XX. Japanese Clearing-Houses. Location — Date of Formation — Hours of Clearing- Average Daily Clearings and Balances — Tokio Clearing-house — Volume of Clearings and Growth in Ten Years — Arrangement of Clearing-room — Abstract of Rules and Regulations of Tokio Clear- ing-house 335 LIST OF ILLUSTRATIONS The London . Clearing-house Frontispiece PAGB Form of Receipt Given by Buffalo Clearing-house to Debtor Banks on Payment of Balances 39 Form of Receipt Used by Buffalo Clearing-house Given by Cred- itor Banks on Receipt of Balances 41 Certificate of Deposit Used by the Associated Banks of Rich- mond, Va 43 The Clearing-room of the New York Clearing-house , . .49 Fac-simile of the Check the Journey of which is Shown on the Map on Page 77 7^ Fac-simile of the Back of the Check Showing the Numerous Indorsements it Bore on Finally Reaching the Bank on which it was Drawn 75 Map Showing the Check's Itinerary 77 Form of Clearing-house Loan Certificate Used by New York Clearing-house in 1873 89 Form of Clearing-house Loan Certificate Used in Philadelphia 93 Form of Clearing-house Loan Certificate Used in Boston . 105 Form of Clearing-house Loan Certificate Used in Baltimore . 107 Form of Clearing-house Loan Certificate Used in New Orleans 109 Form of Clearing-house Loan Certificate Used in Cincinnati .113 Form of Clearing-house Loan Certificate Used in Detroit . .115 Form of Clearing-house Loan Certificate Used in Atlanta, Ga. 119 Form of Clearing-house Loan Certificate Used in Birmingham, Ala 121 New York Clearing-house (Front View) 139 New York Clearing-house (View down Cedar Street from a Point near Broadway) 141 xi xii LIST OF ILLUSTRATIONS PAGE View in Manager's and Assistant Manager's Rooms, New York Clearing-house 143 Resolution Authorizing Exchanges through a Member-bank (New York) 153 Application to Clear for Another Bank (New York) . . . 154 Consent to Clear for Another Bank (New York) . . . .155 Form of Statement of Weekly Averages of Brooklyn Non- member Banks 156 Form of Statement Required of Trust Companies by the New York Clearing-house Association 159 Form Used by the New York Clearing-house in Tabulating Na- tional Bank Statements 160 Form Used by the New York Clearing-house in Tabulating State Bank Statements . . . 161 Skeleton of the Weekly Statement of the Associated Banks of the City of New York 162 Form of Summary of Weekly Statement of Associated Banks (New York) 163 Form of Statement Required of Associated Banks (New York) 164 Skeleton of Quarterly Statement of National Banks (New York) 165 Skeleton of the Quarterly Statement of the Condition of the State Banks of the City of New York 166 Skeleton of Weekly Statement of Non-member Banks (New York) 167 Agreement to Comply with Rules and Regulations Regarding Collections Outside of New York 172 Form of Exchange Slip (New York) 177 Form of " First" or Credit Ticket (New York) . . . .178 Fac-simile of " Small Ticket " Deposited by Messenger with Settling Clerk (New York) 179 View in Clearing-room, New York Clearing-house. Clearings in Progress 181 Form of Delivery Clerk's Receipts (New York) .... 182 Form of Settling Clerk's Statement (New York) . . .183 Form of " Second" Ticket (New York) 185 Form of Proof Clerk's Sheet (New York) 187 LIST OF ILLUSTRATIONS xiii PAGE Form of Settling Clerk's Report to His Bank of Daily Balances (New York) . . .189 Manager's Receipt (New York) 191 Form of Gold Certificate — Face (New York) .... 192 Form of Gold Certificate — Back (New York) .... 193 Clearings for Forty-six Years — Reproduction of a Table Issued by the New York Clearing-house 203 Balances Paid in Money for Forty-six Years — Reproduction of a Table Issued by the New York Clearing-house . . . 205 Due Bill Used in Settling Runner's Exchange by Philadelphia Banks 211 Clearing-house Due-bill, Philadelphia 213 Form of Weekly Statement Required of Philadelphia Banks . 215 Form of Daily Statement Employed by the Banks of Philadelphia 217 A Statement of the Average Condition of Philadelphia Banks . 218 Form of Ticket Used by Boston Banks for Notifying Clearing- house Manager of Amounts Paid in Making Settlements . 234 Form of Weekly Statement Employed by the Boston Banks . 239 Form of Average Weekly Return in Use by the Associated Banks of Boston 240 Form of Statement of the Associated Banks of Boston . . . 241 Exchange Ticket, Foreign Department, Boston Clearing-house . 253 Form of Foreign Slip and Foreign Check Ticket, Boston Clear- ing-house 255 Form of Receipt, Foreign Department, Boston Clearing-house . 257 Form of Letter of Transmission to Correspondents, Foreign Department, Boston Clearing-house 259 Form of Settling Clerk's Statement, Foreign Department, Bos- ton Clearing-house 261 Forms of Reports Used in Trading Balances (Chicago) . . 271 Form of Order Used in Transferring Balances that Have Been Loaned (Chicago) 273 Form of Order on Clearing-house Manager for Balance Due (Chicago) 275 Fac-simile of Debit List Used in St. Louis Clearing-house . 291 XIV LIST OF ILLUSTRATIONS Form Used for Listing Balances in St. Louis Clearing-house Form of Manager's Report of Clearings, Balances, etc. (St Louis) . Form of Delivery Statement Employed at Toronto Fac-simile of First Delivery Voucher (Toronto) . Fac-simile of Second Delivery Voucher (Toronto) Form of Proof Used in Toronto Clearing-house . Fac-simile of Credit Voucher Used at Toronto (black) Fac-simile of Debit Voucher Used at Toronto (red) . PAGE 309 311 313 315 CHAPTER I CLASSES OF CLEARING-HOUSES A Clearing-house Defined — Clearing-houses Classified with Respect to Functions— Clearing-houses Classified with Re- spect to the Funds Used in Settlements. What is a clearing-house? The Supreme Court of the State of Pennsylvania has defined it thus : " It is an in- genious device to simplify and facilitate the work of the banks in reaching an adjustment and payment of the daily balances due to and from each other at one time and in one place on each day. In practical operation it is a place where all the representatives of the banks in a given city meet, and, under the supervision of a competent com- mittee or officer selected by the associated banks, settle their accounts with each other and make or receive pay- ment of balances and so ' clear ' the transactions of the day for which the settlement is made." But we must go farther than this, for though originally designed as a labor-saving device, the clearing-house has expanded far beyond those limits, until it has become a medium for united action among the banks in ways that, did not exist even in the imagination of those who were instrumental in its inception. A clearing-hGai3Q,\tlier,d- fore, may be defined as a device to simplify' and feicilitate. the daily exchanges of items and settlement's of 'baldrices ' 2 CLEARING-HOUSES among the banks, and a medium for united action upon all questions affecting their mutual welfare. The clearing-houses in the United States may be di- vided into two classes, the sole function of the first of which consists in clearing-notes, drafts, checks, bills of exchange, and whatever else may be agreed upon; and the second of which, in addition to exercising the func- tions of the class just mentioned, prescribes rules and reg- ulations for the control of its members in various matters, such as the fixing of uniform rates of exchange, interest charges, collections, etc. Clearing-houses may also be divided into two classes with reference to the funds used in the settlement of bal- ances: First, those clearing-houses which make their settlements entirely on a cash basis, or, as stated in the decision of the Supreme Court above referred to, "by such form of acknowledgment or certificate as the asso- ciated banks may agree to use in their dealings with each other as the equivalent or representative of cash; " and second, those clearing-houses which make their settle- ments by checks or drafts on large financial centres. CHAPTER II CLEARING-HOUSE TERMS How Usages Differ — The Meaning of '* To Clear " — Clearings — Exchange and Exchanges — Bills and Bills of Exchange — Draft and Check — Accounts Balanced and Balances in Accounts — Collections — Items— Clearing - matter — Settle- ments — Out-of-town Checks and Country Checks. Every profession and every line of business, as well as every trade, develops its own peculiar terms and phrases. Those who become familiar with the routine of the busi- ness or the profession use these terms ^mong themselves with a degree of precision and certainty of meaning which sometimes is difficult for one outside of the group to comprehend. The usage in this regard by banks and clearing-houses is no exception to the general rule. Terms which are current in one part of the country, or in one financial centre, do not always obtain in others, and to a certain extent different terms are sometimes employed in different parts of the country for indicating approximately the same things. For these reasons, and others which the reader will readily apprehend, a brief consideration of a few of the prominent terms employed in clearing-house affairs is appropriate by way of intro- duction to the more important chapters which follow. 3 4 CLEARING-HOUSES Nothing like a complete list is attempted, and instead of presenting the definitions in conventional dictionary fashion, the meaning of certain terms and the special uses to which they are applied are laid before the reader in a far less formal manner. The term " clearing-house " is defined at some length in another part of this volume, from the stand-points of use and function. The word is also used in thr^ense of location or place. A clearing-house may be described as an office, established by the banks of a city, where their representatives meet daily, to exchange drafts and checks, and adjust balances. The term " to clear " is popularly defined " to pass through the clearing-house." Another definition is, " to settle accounts by exchange of bills and checks, as is done in the clearing-house." To clear a check means to pass it from the bank that holds it as a deposit or for collec- tion, to the bank on which it is drawn, and to receive pay- ment therefor; but, with the complexities of modern business, a single check is seldom cleared. Instead, a multitude of checks and other items are included in each clearing. The term *' to clear," therefore, takes on a broader meaning, and the only adequate conception of it is afforded by a view of the actual operations of a clear- ing-house, which are set forth in another part of this volume. The word " clearing " designates the settlement of bal- ances between banks, arising from the interchange of checks, drafts, etc., carried on at the clearing-house. The term " clearings " signifies the total of differences bal- anced at a clearing-house. Occasionally the words CLEARING-HOUSE TERMS 5 " clearance " and " clearances," which, properly em- ployed, designate space or distance, are used in the place of " clearing " and '' clearings." Their employment in the place of the latter is not justified by general usage nor by the real meaning of these forms of the word. The term '' exchange," so common in financial and business transactions, has various shades of meaning, ranging from a charge for the transfer of money from one point to another, to the place where business interests of a special class are brought together and where contracts concerning them are made. The word literally means the act of giving one thing as an equivalent for another, or for interchanging two equivalents. From this it comes that the word indicates that which is given or received by an arrangement for mutual interchange, and hence the term " exchanges," frequently employed by those who have transactions with the clearing-house, to indi- cate the items that are to be exchanged, as, for example, in the phrase : " The amount of exchanges." The term '* bill " has several different meanings, rang- ing from a statement of an account, or of money due, to a bank-note or government note. Occasionally, in loose usage, it means a promissory note. In Great Britain the term is frequently used to mean a bill of exchange. As used in connection with clearing-house affairs in this country, it usually designates bank-notes or government notes. A " bill of exchange " is a written order or request from one person to another, for the payment of money to a third, the amount to be charged to the drawer of the bill. This term, therefore, while having a special meaning in 6 CLEARING-HOUSES some cases, often includes drafts which are drawn by merchants upon their customers in ordinary course and put through bank for collection. The term in this sense, however, is less commonly employed than " draft." A '' draft " may be described as an order drawn by one party on another, for the payment of money to a third. It is for the most part limited to an order payable at, or collectable through, a bank or other financial agency. A draft made payable at some time other than at sight, and which has been accepted by the party upon whom it is drawn, is known as an " acceptance," and is treated by banks and clearing-houses the same as a note. A " check " is an order in writing upon a bank or banker for the payment of a designated amount of money to some designated person or order. Checks vary in form. Those which are current between banks and bank- ers, as, for example, the checks that would be used by a country bank in drawing against the balance lodged with its New York correspondent, frequently take the form that commonly obtains with drafts. Hence the term " bank-draft " or '' banker's-draft," often employed by those who purchase New York or other exchange of their local banks, to designate the character of their re- mittance. A " centre " is described as, in the dictionaries, the place about which things cluster, or to which they con- verge. It is also described as the point of emanation or radiation. With this definition before us, it is easy to perceive what is meant by a " money centre " or a " finan- cial centre." The term " balance " has two distinct meanings, and CLEARING-HOUSE TERMS *j the word is used among bankers and business men in a way to indicate two things entirely different from each other. In its simplest form a balance may be declared to be an equality between the credit and debit totals of an account. But it is also used to refer to the difference be- tween such totals, or, in other words, the excess on one side or the other. Thus in the first sense we declare that an account is balanced when it has been closed by secur- ing an equality of the two sides. In the second sense, when we speak of the balance in an account, we mean either the debit or credit amount, as the case may be, that is required to produce an equality of the two sides, or, in other words,, to close the account. The balances in a clearing-house statement are the respective differ- ences between the debit and credit sides of the several accounts included in the statement. A bank's balance in a clearing-house settlement would mean either the amount that it has to pay, or the amount that it is to receive, according to the excess of debits or credits shown by the statement. The dictionaries define the verb '' to collect " as fol- lows : " To gather money from many people." A col- lection is defined as '' that which has been gathered or taken up; " but among the banks and in clearing-house circles the term " collection " is somewhat expanded be- yond these limitations, and is used for designating that which is to be collected. For example, the drafts or bills of exchange which a bank holds at a given date are fre- quently designated as its " collections," particularly at the time that they are being arranged in proper order for transmission to its correspondents or for delivery to the 8 CLEARING-HOUSES clearing-house. Sometimes the term employed in such cases is " collection items," which, of course, means the items for collection. An ** item," as the term is generally understood, means a separate article or entry in an account or schedule, or a sum so entered. The term among banks and in clearing-houses is used in the latter sense almost literally. An item is that of which an entry has been made, whether it is a draft, bill of exchange, check, or note. The word is frequently employed in combination with a qualifying term, as, for example, '' collection items," " out-of-town items," " city items," etc. A term which is as nearly original with, and peculiar to, clearing-houses as any that might be cited, is ** clearing- matter." '' Matter," in this phrase, is a collective term, and designates any and all of the items that go into a clearing-house. Clearing-matter then means that col- lection of items, however assorted, which may be cleared. " Acceptable clearing-matter " would designate that which is acceptable, according to the rules of the clear- ing-house. There would, of course, be the opposite or negative term, for example, " unacceptable matter," meaning that which, while having somewhat of the char- acter of clearing-matter, is not of a kind that is handled by the clearing-house in question, under the rules gov- erning its operation. A settlement, in ordinary commercial afifairs, is an ad- justment of accounts. " To settle " means to liquidate, or to pay, or to adjust differences. A ** settlement " may ■r \ CLEARING-HOUSE TERMS .a mean either the act of settHng, or that which is accom- plished by settHng. A bank's clearing-house settlement therefore means an adjustment or payment of the differ- ence between the debit and credit side of the account, and further designates either a receipt or a disbursement, as the case may be. Each member-bank has a settlement with its clearing-house daily. In the designation of checks, with respect to the loca- tion of the banks upon which they are drawn, consider- able confusion exists at times in the term employed for the purpose. '' Personal check " and " local check " are terms occasionally used to indicate out-of-town checks or checks on country banks. An out-of-town check is one drawn upon any bank outside of the city in which a given clearing-house is located, or outside of the city in which member-banks of the given clearing-house are situated. In other words, it is one that must be sent away for collection. The term ** country check " has the same general meaning, but is applied more particularly to checks drawn upon banks located at a considerable dis- tance from a given clearing-house centre. Referring again to the terms '' personal check " and " local check," above referred to, it must be evident to everyone who gives the matter the least thought, that a check drawn by a depositor on a bank in New York would be a local check, and that it also would be a personal check, and yet such a check, issued in the regular course of business, is not objectionable from any point of view. On the other hand, a check drawn by a merchant in an interior town upon a bank in that town, irrespective of the responsi- lO CLEARING-HOUSES bility of the drawer or the standing of the bank upon which it is drawn, would also be a personal check; but the latter would not represent par funds in New York. Out-of-town checks and country checks, accordingly, are subject to special regulations with respect to costs of col- lection. CHAPTER III SPECIAL FUNCTIONS OF A CLEARING-HOUSE Primary Object — Extension of Field— List of Special Func- tions — Action of Clearing-house Banks at Outbreak of the Civil War — Mutual Assistance of Members — Fixing Rates of Interest on Deposits — The Practice in Sioux City — Establishing Rates of Exchange — Some Buffalo History — Rochester — Baltimore — Houston — Toledo — Topeka — St. Louis— Denver— West Superior— St. Joseph— Clearing- house Loan Certificates. The primary object of a clearing-house is the exchange of checks and drafts between the banks associated to- gether for that purpose, and the settlement of balances resulting from such exchanges; but this is not the only function exercised. As already shown, this single func- tion constitutes a clearing-house of the first class, while the addition of other functions puts the organization into another class. The tendency has been marked, especially in recent years, to include within the legitimate field of clearing-houses all questions affecting the mutual wel- fare of the banks and' the community as a whole. The bankers west of the Mississippi River have given to the country the most striking examples of the possibilities of clearing-houses exercising various special functions, while the great associations of the East, and especially 12 CLEARING-HOUSES that of New York, have exempHfied the utility and value of clearing-house loan certificates. The most important of the special functions of a clear- ing-house are (a) the extending of loans to the govern- ment; (b) mutual assistance of members; (c) fixing uni- form rates of interest on deposits; (d) fixing uniform rates of exchange and of charges on collections, and (e) the issue of clearing-house loan certificates. Less than a decade after the inauguration of the clear- ing-house system in America, the Civil War broke out, and threw the government into a condition of acute finan- cial embarrassment. The ordinary sources of income were insufficient to meet the demands of the approaching crisis. Thereupon the banks, members of the clearing- houses in New York and Boston, responded with practi- cal unanimity to the call of the government for loans, by which the latter was enabled to put armies in the field and maintain the struggle for national unity. In times of panic it is not infrequently the case that a bank in good standing becomes temporarily embarrassed. Unfortunate report may cause a run upon it, and, being unable to call in a sui^cient amount of its outstanding loans to meet the demands of its frightened depositors, it must either secure a loan or fail. In such an emergency the other members of the clearing-house are usually will- ing to render assistance until the strain is relaxed. To secure such aid, however, a bank must be sound in its management and of good repute in every respect. Other- wise, the members of the clearing-house are likely to de- cline assistance, being quite willing to get rid of a weak and ill-managed member. FUNCTIONS OF A CLEARING-HOUSE 13 Another of the special functions of a clearing-house is the fixing of uniform rates of interest on deposits. In some associations the legality of such action is still re- garded as a moot question, and hence they are reluctant to enforce such a rule. Other associations, however, have not hesitated to regulate the members on this point. As early as 1881, rates on interest were agreed upon in Buf- falo, and were observed, practically without fraction or violation, for some nine years thereafter. They were broken at last only because of their non-observance by new banks, which at the outset refused to become mem- bers of the clearing-house organization. The Sioux City, la.. Clearing-house Association has fixed a maximum rate of interest of three per cent, per annum, to be paid by the members upon bank accounts or balances, when the balances amount to one thou- sand dollars or more; and a minimum rate on loans or re-discounts to banks of eight per cent. At St. Jo- seph, Mo., interest may be allowed to country banks at the rate of three per cent, per annum upon the amount remaining, after deducting for an average bal- ance of two thousand dollars per day. No member can pay interest on any bank account when the bal- ance averages less than two thousand dollars a day. In- terest at the rate of three per cent, per annum may be allowed to any bank in the city, or to those individuals specified in the rules. No interest can be paid on any account except as specified in the rules, but it is under- stood that the city, county, and State are exempted from all interest rules, and any member may pay any rate of interest agreed upon on such public accounts. Interest 14 CLEARING-HOUSES may be allowed upon certificates of deposits at a rate not to exceed four per cent, per annum for six months' time, and five per cent, per annum for twelve months' time. The certificates must state positively whether the money is left for six or twelve months. No interest is payable for parts of a month. Deposits made on or before the third of any month may draw interest from the first of the month. Still another of the special functions of a clearing-house is the fixing of uniform rates of exchange, and of charges on the collection of items. In 1881, the year in which the clearing-house in Buffalo was organized, a prominent banker in that city succeeded in uniting the banks on rates. The promoter of the enterprise, though well known for rate-cutting, was a successful banker and had always been able to meet competition successfully. Hence, when he proposed a uniform-rate system, the other banks were only too glad to consider his proposi- tions. Meetings were accordingly held, schedules of charges were drawn up, and rules were formulated for the guidance of the banks. In a short time a schedule was adopted and put in successful operation. The rates were not high, but were arranged so as to do justice, as far as possible, to the banks on the one hand and the depositors on the other, and so satisfactory was the new regime that it remained in harmonious operation for nearly nine years. It is said that the increase in profits or collections, to the twelve banks interested, over the former method of doing business free of charge, paid the dividends of all the banks each year, and whatever profit was made on loans and discounts was used to build up FUNCTIONS OF A CLEARING-HOUSE 15 the surplus. But the formation of new banks finally played havoc with the uniform-rate system. While it lasted it was made obligatory upon every bank, but in 1 89 1 the newly organized banks began to cut on rates. The clearing-house members endeavored to induce the new banks to join the association, but did not at first suc- ceed. It was regarded as unjust to the member-banks to hold them to the existing agreement when their com- petitors were free, and accordingly, in June, 1891, the schedule of rates was made no longer obligatory. In 1895 the Rochester, N. Y., Clearing-house Asso- ciation put in operation a schedule of collection charges, and the results have been most satisfactory. AH of the banks were in favor of it, but there was at first some com- plaint on the part of customers. The rates for remit- tances of city items were fixed at a meeting of the asso- ciation early in the year 1895, as follows: Minimum charge, ten cents; from one hundred dollars to one thou- sand dollars, one-tenth of one per cent.; from one thou- sand dollars to two thousand dollars, one dollar; over two thousand dollars, one-twentieth of one per cent. ; par re- mittances to be made weekly. Provision was made for a fine of one thousand dollars upon any member failing to observe the rates; two hundred and fifty dollars of this fine is to be paid to the party giving the information. On the first day of February, 1897, a rule went into force at Baltimore, requiring the members to charge and collect without rebate, from all individuals, firms, or cor- porations, residing in the city, who might thereafter be- come new depositors or customers of the banks which are members of the association, such minimum rates of ex- 1 6 CLEARING-HOUSES change on checks, drafts, notes, and acceptances, pay- able out of the city, as are named in schedules to be furnished from time to time by an exchange committee of the clearing-house. The penalty for violation of this rule is expulsion from the association, provided a major- ity of the members vote in favor thereof. At a meeting of the Houston, Tex., Clearing-house Association, March 9, 1897, the following resolutions were unanimously adopted : '' Owing to the fact that banks in certain cities of this State are uniformly charg- ing the banks of Houston exchange on all collections not reading ' with exchange,' bearing indorsements of banks outside the State; therefore be it " Resolved by the Houston Clearing-house Associa- tion, that all its members will hereafter, as a matter of self-protection, charge the current rate of exchange upon all collections received from banks located in any city where the foregoing rule is in effect, and which may bear the indorsement of any bank or banker outside of Texas, or originating outside of the State. " Resolved, that this resolution take effect on and after April I, 1897." In the latter part of Rule 5 of the Articles of Associa- tion of the Toledo, O., Clearing-house, it is provided as follows : " It shall also be in the power of such com- mittee (the committee of management) to fix rates of charges on items outside the city and charges for drafts or currency from time to time, if deemed advisable, and change, revise, or suspend the same as circumstances require." In the Constitution of the Topeka, Kan., Clearing- FUNCTIONS OF A CLEARING-HOUSE 17 house Association, the rules on rates for collection are as follows : " Rates for collection whether made or not : Collec- tion payment in advance up to fifty dollars, ten cents each item; fifty dollars to one hundred dollars, fifteen cents each item; one hundred dollars and upward, twenty-five cents each item. Collections on agricultural implement paper, twenty-five cents each item. All drafts drawn with bill of lading attached, whether cash items or not, twenty-five cents each item; and if cash is advanced on the same, not less than ten cents per hundred or one dollar per thousand. Rates of exchange on drafts and collections drawn with exchange shall be made at not less than fifteen cents up to fifty dollars; twenty-five cents up to one hundred dollars, and ten cents for each additional hundred. The above charges shall not apply to col- lections not drawn with exchange, received from bank correspondents who do not charge collecting bank on like items." The Clearing-house Association at St. Louis has in force a most successful system of collection charges. The new rules became operative March i, 1895, and are obligatory upon all the banks, members of the Clear- ing-house Association, and upon all banks and trust companies making their clearings through the clearing- house. Under this regime every bank and trust com- pany, whether a member, or clearing through a member, is required to charge for all items received from St. Louis city customers, and passed direct to their credit, or cashed for any resident of the city, not less than one-tenth of one per cent, of the amount of the item, and if said per cent. 1 8 CLEARING-HOUSES does not amount to fifteen cents, the charge must not be less than that sum. It is understood, however, that all items received at any one time from any customer, and payable at one place, may be added together and charged for as if they were one item. This schedule applies to that section of the United States bounded by North Carolina, Tennessee, and Arkansas on the south, and North Dakota, South Dakota, Nebraska, and Kansas on the west. In all the rest of the States and Territories a charge must be made, amounting to not less than one- fourth of one per cent, of the amount of the item, and if said per cent, when calculated upon any such item does not equal fifteen cents, the charge must not be less than that sum; but it is understood, as before, that all items received at any one time, from any customer, and payable at one place, may be added together and treated as one item. On all such items drawn with exchange the charge is one-half of the foregoing rates, except those upon which the charge of fifteen cents is made. It is discretionary with each bank and trust company as to the charge on items drawn on the cities of New York, Brooklyn, Jersey City, Boston, Philadelphia, Balti- more, Chicago, Cincinnati, Louisville, and New Orleans, and bank-drafts on banks in Kansas City, Mo. Each bank and trust company, member of or connected with the clearing-house, is required to collect the foregoing charges on all items not later than the third day of the calendar month next following the receipt or handling of the item, or issuance of the draft or check, and no such bank or trust company is permitted to allow, either di- rectly or indirectly, any rebate or return of any such FUNCTIONS OF A CLEARING-HOUSE 19 charges, or to make in any form, whether of favor or otherwise, any compensation therefor. The violation of any of these rules by any bank or trust company clearing through a member, would deprive the same of its connection with the association, and work the forfeiture of its rights and privileges in the clearing- house. For a similar offence any member would be ex- pelled on a three-fourths vote in favor thereof. The Denver, Col., Clearing-house Association has rules regarding collection charges, which went into oper- ation October i, 1897. These rules require that all checks, drafts, or other items deposited by corporations, firms, or individuals, or presented for negotiation, not drawn on or payable in certain leading cities throughout the United States, as specified in the rules, shall be dis- counted, the rate to be not less than fifteen cents per one hundred dollars or fraction thereof, and, in addition thereto, the cost of collecting the same. On collections payable with exchange, a charge of one-tenth of one per cent, is collected from the payer of the collection, and in case of refusal to pay exchange, payment of the collection is not received. No collection is made for less than ten cents. At West Superior, Wis., a regular system of rates of charges on collections is enforced. On collections out of town a charge is made of twenty-five cents per one hun- dred dollars or under, and ten cents for each additional one hundred dollars or fraction thereof. A similar charge is imposed for remitting for collection in the city or else^ where. The clearing-house at St. Joseph, Mo., is sui generis. 20 CLEARING-HOUSES No Other association — not even the one at St. Louis — approaches it in the detail with which it has worked out a system of regulations governing the conduct of its mem- bers. On all items, except in certain cities specified, credited or cashed for city customers, a charge of fifteen cents is made on each one hundred dollars or fraction thereof, no charge being made at less than fifteen cents. Upon all items drawn upon points in nearly all the States west of the Mississippi River, a charge is made of twenty- five cents per one hundred dollars or fraction thereof. Items upon Denver, New Orleans, and Memphis are charged upon at the rate of fifteen cents per one hundred dollars. On all out-of-town items left for collection, a charge of fifteen cents per one hundred dollars or fraction thereof is made, in addition to the actual cost of collec- tion. A charge of one dollar for one thousand dollars is made on all St. Joseph items collected for, or bearing the indorsement of banks on and east of the Mississippi River, and other out-of-town customers, except regular country correspondents. On all out-of-town items a charge is made of one dollar per one thousand dollars, over and above the cost of collecting. On all checks and other items received from St. Louis, points south of that city, and from all points east of the Mississippi River, drawn on St. Joseph, and all points west of the Missis- sippi River, a charge of one-tenth of one per cent., in ad- dition to the cost of collecting, is levied, for credit made or exchange returned therefor. Drafts drawn by country correspondents on members of the association may be excepted from this rule. On all items received from country correspondents, bearing the indorsement of St. FUNCTIONS OF A CLEARING-HOUSE 2 1 Louis, or any point east of the Mississippi River, a charge is made of not less than ten cents per one hundred dollars. For violation of any of the rules of the association, the of- fending member is liable to a fine of one thousand dol- lars, and may also be expelled from the association by a two-thirds vote of all the members. In addition to the functions we have just described, we may mention the regulation of premium on exchange, the cost of transfers by wire, and the limitations to the de- posits of city customers. Each member of the St. Joseph Clearing-house is al- lowed to submit a list of the names of jobbers doing busi- ness in the city to whom it may sell exchange at the rate of not less than fifty cents per one thousand dollars. The St. Louis Clearing-house makes a like charge to any party taking a draft or a check drawn by any bank or trust company, member of or connected with the Clear- ing-house Association, on New York, Boston, or Phila- delphia. If the premium thus estimated on the amount of any draft or check does not equal fifteen cents, then the charge on that item must be that sum. But this rule does not apply to the purchase and sale of exchange be- tween members of the clearing-house or institutions clearing through members. Upon all transfers by telegraph by any member of the Denver Clearing-house Association, a charge of one per cent, is made up to one thousand dollars, and one-eighth of one per cent, above that amount, but on a transfer of one thousand dollars to two thousand dollars a charge must be made of not less than two dollars and fifty cents. Transfers by telegraph for city customers may be made 22 CLEARING-HOUSES by members of the St. Joseph Clearing-house for two dollars per one thousand dollars, in addition to the cost of the telegram. For banks, a charge for transfers must be made of not less than one dollar per one thousand dollars, in addition to the cost of the telegram. The position recently taken by the New York Clearing- house in the matter of collecting out-of-town items, should be referred to in this connection. It is discussed in another chapter, to which the reader is referred. The same remark applies to the foreign department of the Boston Clearing-house, recently organized, which is likewise presented in another chapter. The last of the important special functions of the clear- ing-house, to which attention will be called, is the issue of clearing-house Joan, certificates in times of panic. By this means, in some cases, the specie reserves of the clear- ing-house members have been combined in a way to be- come a common fund, so that any bank which experi- enced an unusual demand for specie was supported by the combined reserves of all the banks. The bank thus as- sisted secures the other members against loss, by de- positing with a committee, appointed for the purpose of receiving them, its securities in th^shape of stocks, bonds, and bills receivable. So importanTare the history, meth- ods, and results of this remarkable* device, that special chapters are necessary for their exposition. ^ CHAPTER IV POSSIBLE DEVELOPMENTS OF ^HE CLEARING- HOUSE SYSTEM New Functions to be Exercised — Country Checks — Transfer of Currency from Point to Point — Possible Use of Gold Cer- tificates — Special Examiners — Settlement of Balances — Advantages of the Cash Basis — Clearing-house Deposi- tories — 1 he Use of Depository Certificates. The clearing-house system is becoming a definitely recognized power in the financial methods of the United States. It is as yet in its infancy, and the powers that the various clearing-houses possess are capable of devel- opment and expansion to an indefinite degree. The clearing-house, which was begun simply as a labor-saving device, has united the banking interests of various com- munities in closer bonds of sympathy and union, and has developed into a marvellous instrumentality for the pro- tection of the community from the evil effects of panics and of bad banking. Clearing-houses are gradually be- coming a welding force that ultimately will bring to the banking business of this country the centralization which it so greatly needs. In the course of time, rates for money in the United States will become more and more on a par with those prevailing in European money centres, and then the clearing-houses of the various financial cen- 23 24 CLEARING-HOUSES tres of this country will be obliged to undertake functions which as yet they have only discussed. As money rates decrease, losses from bad debts must be brought to a minimum, and the question of a central agency, which shall disseminate information regarding paper outstanding among the banks, must and will re- ceive the attention it deserves. ^ The payment of uniform rates of interest on bank de- posits has already been taken up by some of the associa- tions, and will in due time receive the same careful at- tention here that is accorded it in London. The time is near at hand when the banks that are members of clear- ing-houses will be obliged to sink their differences, and, by agreement, regulate, monthly or quarterly, the rate of interest to be paid, this rate to be subject to change, ac- cording to varying conditions of the money market. ^More careful supervision over the establishment of new institutions will be necessary, and the regulations regard- ing non-members clearing through members will also re- ceive closer attention. ^ The question of country checks is now being regulated in some clearing-houses — a matter which is specially treated in one of the chapters following, and the time is not far distant when this subject will receive the con- sideration from all the clearing-houses to which it is entitled. i/The question of shipping currency by express, from one clearing-house to another, will, in time, be effec- tively dealt with. A law allowing the legal tender or gold certificates issued by the various assistant treasurers of the United States, payable to any member of a given THE CLEARING-HOUSE SYSTEM 25 clearing-house, to be indorsed and used in the payment of balances in any city in which there is a sub-treasury, is needed, and no doubt in time will be secured by the co- operation of the different clearing-houses. As these cer- tificates are payable only to specified clearing-house banks in certain cities, they could be sent by mail at small rates to the bank, thereby becoming a medium of exchange between large centres, rninimizing loss and saving the transportation of large sums of money. The government might make a small charge for their re- demption, if it redeemed them in any city other than the one of issue. ^Special bank examiners, assisted by trained experts, employed by clearing-houses, subject to rigid rules, and ready to go to work at a moment's notice, might be use- ful to the members of a clearing-house, for the purpose of making examinations. These examiners should be paid only moderate sums for examining banks, and this would enable directors of institutions that are members of a clearing-house to secure, at a moment's notice, parties who are trained and thoroughly competent to perform the desired work. As these men would be in the employ of the clearing-house, they would not be subject to out- side influences, and in this way the question of the super- vision of banking institutions by directors would be dealt with effectively. The settlement of balances is a matter which should be most carefully considered by the banking and business community, for the proper management of settlements will do a great deal toward enhancing the prosperity of the community. Bankers sometimes plead for a more 26 CLEARING-HOUSES elastic currency, but what is needed is more elasticity in the assets of the banks. What is wanted are assets that are readily convertible into cash in times of panic, and which will pay depositors, as well as^xpermit new loans. In such times banks need expansion inNlie right direc- tion, and not contraction. TCash settlements in all the clearing-houses of the United States would be\conducive to better banking, for, under this rule, the clearing-house banks would be obliged to keep themselves prepared at all times to meet large drafts upon them thrdugh the clearings. On the other hand, when clearings are settled by drafts upon financial centres, if the banks are not pre- pared for emergencies, they borrow from the institutions in those centres, and sometimes thereby expand them- selves beyond prudent limits. Bank officers often loan money to manufacturing cor- porations, which invest the same in plant, and are for this reason unable to meet their notes when due. Such loans become fixed assets of the bank, and are not avail- able in times of financial stringency. The banks thereby become, to a certain extent, stockholders in the corpora- tions. If the banks compel the payment of such loans in times of trouble, they thereby restrict the operations of the manufacturing concerns, throw men out of employ- ment, and thus disarrange the entire industrial system of the community. Banks are often led to invest their money in unavail- able assets, simply because they feel that they will not be called upon to pay any large amount of cash, either to their depositors direct, or through the clearing-house. Consequently, the settlement of balances in anything but THE CLEARING-HOUSE SYSTEM 27 cash, or its equivalent, is liable at times to affect the whole economic condition of the community. If a care- ful study were to be made of the most prosperous of our interior cities, it would be found that the banks in those cities settle their clearing-house balances on a cash basis. Cash settlements at the clearing-houses of interior cities would compel the banks to keep more money in their vaults. This would enable them more readily to meet the requirements of their customers. The need of outside assistance would be, in a measure, removed, and thereby all the financial institutions of the country would be kept upon a more even basis. Some of the large clearing-houses would find it ad- vantageous to provide depositories in which currency of all denominations could be deposited in vaults, and cer- tificates issued therefor, that could be used in the settle- ment of balances. Then, during the crop-moving peri- ods, and at other times when there is a demand for small bills, they could be supplied from the clearing-house vaults. By such an arrangement the banks would not be obliged, as has often been the case, to give up one forrn of money which they desire to keep for the sake of pro- curing another form, and therefore they would be able to work to a greater or lesser extent independently of the sub-treasuries. These and many other matters might be taken up by clearing-houses, and brought to the same degree of per- fection as the loan certificate, an instrumentality which has been of inestimable value to the business world. CHAPTER V THE ADMINISTRATION OF CLEARING-HOUSES List of Officials— Duties of Officers— Committees— Annual Meetings— Plan of Administration in Canada— Duties of Officers and Committees. The government of a clearing-house association in the United States is theoretically vested in a president, a vice- president, a secretary, a treasurer, a manager, and a clear- ing-house committee, sometimes termed the committee of management, or the executive committee. Not every association, however, is as completely officered as this. In fact, there are many associations that do not have the full list of officials named. A president, a manager, and an executive committee, however, are found in the organi- zation of nearly every clearing-house association, for these functionaries are practically indispensable. The other officials mentioned are lacking in various associations, especially in those located in the smaller cities, their du- ties being performed by some of the other officers. It is the duty of the president to preside at all the meet- ings of the association. As a rule, he has power to call special meetings whenever he may deem it advisable, and must do so upon the request of a specified number of the members. He exercises a general supervision over clear- ing-house affairs, and performs the duties usually de- 28 THE ADMINISTRATION OF CLEARING-HOUSES 29 volving upon an executive officer. In many cases he is ex-ofUcio chairman of the clearing-house committee and of all standing committees. He is elected annually, with, very few exceptions, and serves without compensation. The vice-president performs the duties of the president in the latter's absence. The duties of secretary and treas- urer are frequently performed by the manager. The sec- retary keeps the record of the proceedings of the meet- ings of the association, and performs all the duties usually pertaining to that office. The treasurer must account for the funds intrusted to his keeping, and must pay out the same upon the written order of the president, countersigned by the manager, or, if the latter be at the same time treasurer of the associa- tion, then upon the written order of the clearing-house committee, or upon any other authority that the associa- tion may designate, ^'"'^he manager is either elected by the association or ap- pointed by the executive committee to serve, as a rule, one year, although almost invariably he is re-elected from year to year for an indefinite period. In some of the large cities a heavy bond with sureties is required of the man- ager, varying in amount from ten thousand dollars to twenty thousand dollars. In cities where no cash is used in the settlement of balances, there is, of course, much less opportunity for fraud on the part of the manager, and hence in such cases, as a rule, no bond is demanded. In many of the smaller cities, where the manager's duties and responsibilities are light, and where he is regularly employed in some other capacity, his services are not in- frequently gratuitous. 30 CLEARING-HOUSES The manager has immediate charge of all business at the clearing-house, subject to the control of the clearing- house committee. The employees and the settling clerks and messengers from the banks, while at the clearing- house, are under his immediate direction. He imposes and collects fines for violations of the rules of the associa- tion, has supervision of all the records of clearances and settlements, and sees that the clearing-house and the property connected therewith are kept in order. He makes such annual reports and performs such other du- •^ties as may be required of him. The clearing-house committee is usually composed of three members chosen from the most capable and expe- rienced bankers in the association. In one case which has come to notice, the membership of this committee consists of only two. It sometimes exceeds three, as at New York and Philadelphia, in each of which cases there are six members besides the president, who is a member ex-oificio. The clearing-house committee is elected annually, and is by far the most important of all the committees. In it is vested almost absolute power, the direction of prac- tically the whole machinery of the clearing-house rest- ing in its hands. It is empowered by the association to procure suitable rooms for the clearing-house, to provide proper books, stationery, fuel, furniture, and whatever else may be necessary for the convenient transaction of business; to appoint a manager, except where this power is directly exercised by the association, and generally to supervise affairs. It draws on the members for their share of the expenses, fixes the salaries of the clerks in THE ADMINISTRATION OF CLEARING-HOUSES 31 the clearing-house, and has the power to remove the same, and the manager as well, whenever it may deem such action to be for the best interest of the association. « Not infrequently the clearing-house committee is au- thorized to examine a member, whenever it may seem to it necessary so to do, or whenever requested to do so by a specified number of the other members, and, in case the member's condition justifies it, to demand sufficient securities for the protection of its balances resulting from the exchanges of the clearing-house. It also has power, whenever it may seem necessary for the protection of the other banks, to suspend a member from the association until the latter takes action upon it. The clearing-house committee, in most cases, holds regular meetings month- ly, or oftener. Stated examinations of funds and securi- ties are often required, as, for example, at San Francisco, where the committee must examine, at least quarterly, all securities and deposits of the association in its charge. In addition to the clearing-house committee, there are frequently a conference committee, a nominating com- mittee, an arbitration committee, a committee on admis- sions, an exchange committee, and, in special emergen- cies, a loan committee. No one association has all these committees, but the New York Clearing-house has all but the exchange committee. Most clearing-houses are too small and their duties too simple to require so exten- sive a division of powers, and hence, as a rule, we find only one or two committees at most, in addition to the clear- ing-house committee. The conference committee is elected annually to serve in special emergencies, and its duty consists in acting in 32 CLEARING-HOUSES conjunction with the clearing-house committee when- ever the suspension of a member becomes a question of expediency. There must be at least a majority of each committee present to suspend a member, and a unani- mous vote is necessary to carry. In case of a suspension, the clearing-house committee must forthwith call a gen- eral meeting of the association to take the matter into consideration. The nominating committee is elected annually, and is charged with the duty of presenting to the association, at each annual meeting, the names of candidates for presi- dent and secretary, and for membership upon the clear- ing-house, conference, and nominating committees. The arbitration committee is appointed by the presi- dent at each annual meeting. Its duty is to decide all disputes that may be submitted to it by both parties thereto, a member of the association being one of them. In associations where no arbitration committee exists, its function is usually performed by the clearing-house committee. The committee on admissions is appointed annually by the president, and the clearing-house refers to it for examination all applications for membership in the association. Where an association has an exchange committee, the committee is elected each year. It is authorized and re- quired from time to time to prepare schedules of rates of exchange on out-of-town items, including among them those taken as cash received for collection, or held as security for loans, or that might be discounted subject to collection. THE ADMINISTRATION OF CLEARING-HOUSES 33 The Clearing-house Association holds an annual meet- ing for the purpose of electing officers and committees, and for the transaction of other business. The quorum is usually fixed at a majority of all the associated banks. In some instances, however, it is placed at two-thirds, and in a few cases even as low as one-third, of all the members. Sometimes a specified number is designated as constitut- ing a quorum. Each bank is expected to be represented at the annual meeting by one or more of the officers, but usually is allowed only one vote. An exception to this rule is the association at Worcester, Mass., where two votes are allowed. For failure to be represented at an annual meeting, a fine of two dollars, or three dollars, or even five dollars, is imposed. It is the duty of the asso- ciation to fix the salary of the manager, admit banks to membership, and, when occasion demands, to .suspend or expel members. In some of the large cities the asso- ciations receive in special trust, and issue certificates for, such United States gold coin as any of the associated banks may deposit for safe-keeping for clearing-house purposes. The method of controlling clearing-house organiza- tions in Canada is somewhat different from that employed in the United States. There the supreme executive body is the board of management. At Halifax and Hamilton the cashiers and managers of the several banks constitute the board of management. At St. John only the man- agers or agents, or, in their absence, the acting manager or acting agents, constitute the board. At Toronto seven bank officers are elected at each annual meeting to serve in this capacity, and at Winnipeg the committee is com- / 34 CLEARING-HOUSES posed of five bank representatives. The chairman of the board is elected annually at Halifax, Hamilton, and St. John, and at Toronto a chairman, vice-chairman, and secretary-treasurer are elected. The powers of the board of management are practi- cally absolute in all clearing-house affairs, being co-ex- tensive with those of the clearing-house committee, and the association acting in executive session in the United States. It is the custom with Canadian clearing-houses, through the board of management, to arrange with a member to act as the clearing-bank; to select an officer from time to time to act as manager of the clearing-house; to make assessments upon the members for expenses, and to exercise general control over clearing-house affairs. The manager presides at the exchanges between the banks and settlement of balances, has charge of the rec- ords of the clearing-house, exercises control over the clerks from the several banks while at the clearing-house, and, in a word, performs all the duties customarily per- formed by clearing-house managers in the United States. CHAPTER VI THE SETTLEMENT OF CLEARING-HOUSE BALANCES Results Accomplished by Settlements — Ratio of Balances to Clearings — Settlements with Money — Clearing-house Set- tlements in Canada — Money in Labelled Packages — Objec- tions to Silver — Methods of Settling Balances Without Money — Advantages of the Manager's Check Over Settle- ments in Cash. The exchange of items between the banks accom- plishes two results : First, it places at the proper banks, for payment, the items to be exchanged, which the several banks hold; and second, it determines the difference be- tween the amount of th6 items held by each bank against all the other banks, and the amount held by all the other banks against each individual bank. This difference con- stitutes the balance which is to be settled. A bank cannot know whether its exchanges at the clearing-house will bring it out a debtor or a creditor^ until the settling clerk returns from the clearing-house. It is a very rare occurrence for a complete offset to take place in any bank's exchanges; that is, for the amounts sent to the clearing-house to exactly equal the amounts received, in which case, of course, there would be no bal- ance. Each bank expects a difference one way or the other, ranging from a few cents to a very large amount. 35 36 CLEARING-HOUSES In a great city, a bank may be a creditor one day to the extent of several hundreds of thousands of dollars, and the next day a debtor to a similar amount. It is of the utmost importance, therefore, that each bank should be prepared to meet any balance which may appear against it at the clearing-house. The ratio of balances to clearings depends partly upon the number of banks, but much more upon the amount and character of their business, and upon their relations one to another. This is illustrated by figures, which were collected in 1897-98: At Pittsburg, with nineteen mem- bers and seventy non-members clearing through mem- bers, the balances were sixteen and two-thirds per cent, to twenty per cent, of the clearings; at Buffalo, with eighteen members, fifteen per cent.; at Chicago, with twenty-two members and ninety-seven non-members clearing through members, ten per cent.; at Louisville, with fifteen members, twenty per cent.; at Rochester, with sixteen members, from twenty per cent, to twenty- five per cent.; at St. Louis, with seventeen members, ten per cent. ; while in New York, during the first forty- three years of the existence of the association, it was only 4.65 per cent., notwithstanding the operations of the United States Assistant Treasurer, who almost always has a heavy debit balance. The more nearly the banks stand on an equality with each other, the more nearly will their transactions ap- proach a complete offset, which, of course, would leave no balance to settle. The methods of settlement of clearing-house balances may be divided in a general way into two classes : First, SETTLEMENT OF CLEARING-HOUSE BALANCES 37 settlements with money, and second, settlements without money. A clearing-house acts merely as the agent of the banks in the payment of the balances. It pays to the creditor banks the money it receives from the debtor banks. As soon as the result of the exchanges is known, the debtor banks may begin the payment of their balances, all of which must be paid in before the expiration of a specified time, usually two or three hours after the exchanges. Failure on the part of any member to meet its require- ment promptly would subject it to a fine. Any kind of United States money is acceptable in most of the small clearing-houses; but in a majority of the large ones certain kinds of money are npt acceptable. The following are illustrative examples : At Baltimore, gold coin, greenbacks, and certificates, redeemable in coin, are used, and silver is accepted only for fractional parts of thousands; at Buffalo, United States Treasury certificates. United States legal tender notes, national bank notes, gold and silver certificates, and gold coin are used; at Milwaukee, gold coin and currency; at St. Paul, all forms of currency except silver coin, and at San Francisco, Los Angeles, Cal., and Portland, Ore., gold coin is used exclusively. About seventeen per cent, of the clearing-houses of the United States settle their balances entirely on a cash basis. In Canada, however, all the clearing-houses, ex- cept the one at Hamilton, settle in government legal tender notes. Settlements in Hamilton are made by drafts upon the head offices or agents of the respective banks, on Montreal, in favor of the clearing-bank which 38 CLEARING-HOUSES gives its own drafts on Montreal to the banks in credit. Some clearing-houses require that money, when paid in by the banks, shall be assorted and put up in packages, each package to contain bills of a given kind and denom- ination, and when the balances are sufficient, to consist of specified amounts, usually one thousand dollars, five thousand dollars, and ten thousand dollars, respectively. For instance, at Milwaukee all currency paid to the clear- ing-house, when the amounts are sufficient, must be put up in packages of five thousand dollars, or ten thousand dollars each. The inside parcels of the packages must bear the number of the bank putting up the same, with the date thereon. Such packages must be securely bound with twine or tape, with a wide paper band around the centre, fastened with wax, bearing the seal of the member putting them up, and the date of sealing. No notes of a less denomination than five dollars (except to make change), or over one thousand dollars, can be paid in. Likewise, all gold coin must be put up in strong canvas bags, of five thousand dollars each, and such bags must have suitable labels bearing the name of the sealing mem- ber, amount of contents, and date of sealing. For all gold coin or currency paid in, in amounts less than five thousand dollars, the value of the parcel or package must be guaranteed by the bank (whose number it bears) to the bank breaking the package, for twenty-four hours after receiving it, but in no case can claims be made after a package has been paid to any party not a member of the association. Silver coin is not excluded from settlements in clear- CO D I - 1 . -Dollars i i 5f I? I to 1 Caufo^ S C o 43 I o i CQ 40 CLEARING-HOUSES ing-houses in the United States because of any prejudice against it as money, but because, owing to the enormous amount of clearing-house transactions, its bulk would render it too cumbersome and inconvenient for handling. For the same reason it is not so desirable as other forms of money in large transactions of any kind. A receipt is given at the clearing-house to each debtor bank as soon as its balance is paid. There is presented herewith a reproduction of the form used at Buffalo. This receipt is filled out by the clearing-house clerk, showing the amount due from the Marine Bank (No. 2) to the clearing-house. Its authenticity is established by the signature of the manager at the top. This receipt is taken away by the Marine Bank messenger, who re- turns with the funds. The manager then signs the re- ceipt in the usual place, and in this condition it becomes a voucher to the Marine Bank for the payment it has made. The clearing-house clerks of these banks have already carried back a receipt, of which a copy is given here- with, that is likewise " vised " by the manager at the top. This receipt is then signed, for instance, by the cashier of The City National Bank (No. 20), and sent at the hands of two trusted messengers, who receive the funds from the clearing-house manager. This receipt in turn is kept by the clearing-house as its voucher for the pay- ment made. A receipt is sometimes written by the clerk receiving the balance, in a book kept by the manager for that purpose, but a more common method is one sim- ilar to that described as given by the bank. There are no less than five different methods of settling balances, in whole or in part, without the use of money on O ho u o € oa ■ s Q c 3 c E n of this C er of any o < D o c E • 1 r^ cd s -^ O c OQ n u E >% § S ■ r o o >i> Cl, ^ 1 c c ) o > 1 i : 1 c ir • 1— I E C > ^ 5- ^ :z < •QNOWHDI^ JO :>INVg AX] o > C O cS 44 CLEARING-HOUSES thus their expenses, by having the manager's check cleared. With all its various disadvantages there is one impor- tant advantage of the manager's check over settlements in cash at the clearing-house : By its use only one trans- fer of cash is necessary in making settlements, and thus risk is greatly diminished. The second mode of settlement, other than on a cash basis, is by borrowing and loaning balances without in- terest. At Pittsburg this method is practised as a mat- ter of convenience to the several members. After the exchanges have been made and the balances determined, five or six minutes are devoted to this transfer. Banks are not allowed to over-borrow or over-loan under a penalty of a fine of two dollars for each offence. The third method is that of borrowing and loaning balances upon interest, as practised at Boston. The fourth method is that of employing some form of certificate. Many of the large clearing-houses provide for a depository to receive in special trust such United States coin as any of the banks belonging to the associa- tion may voluntarily deposit with it for safe-keeping, upon which certificates may be issued, to be used in the settlement of clearing-house balances. Such certificates are usually issued in denominations of five thousand dollars and ten thousand dollars, and are negotiable only among the associated banks. Many of the clearing- houses impose a fine for their transfer to any other party than a member of the association. Coin certificates were devised by F. W. Edmunds, of New York, and came into use about 1857. The Bank SETTLEMENT OF CLEARING-HOUSE BALANCES 45 of America first acted as a depository, but after the be- ginning of the greenback epoch, the associated banks chose the United States Sub-treasury as such depository, for both gold and currency. When the new clearing- house in Cedar Street was occupied, the gold deposits were transferred to the magnificent vaults with which it is provided, and these at the present time hold a very heavy deposit of gold. The principal cities where gold depository certificates are used at the present time are New York, Philadelphia, and Buffalo. In cities where United States sub-treasuries are located, banks may deposit with them United States legal tender notes, and receive therefor legal tender certificates from the assistant treasurer, the same to be used in the settle- ment of clearing-house balances and to be negotiable only among the members of the clearing-house in the city where they are issued. At Philadelphia these certificates are issued in denominations of five thousand dollars and ten thousand dollars; and at Baltimore in denominations of ten thousand dollars only. It is required that they be indorsed both by the bank to which they are issued and by the bank which redeems legal tender certificates with them. Clearing-house loan certificates are issued only in emergencies, as explained in the chapter devoted to that subject. The period during which balances are settled by such instruments lasts usually only three or four months, or until the panic which called them forth has subsided. The fifth method is by draft on some other city. In some places the option is given of settling in cash, or by 46 CLEARING-HOUSES draft, as at Bay City, Mich., Everett, Wash., Frederick, Md., Jacksonville, Fla., Knoxville, Tenn., Norfolk, Va., Rochester, N. Y., and Scranton, Pa. In others, settle- ments are made exclusively by drafts on another city. Among these are Syracuse, N. Y., Worcester, Mass., Saginaw, Mich., Fall River, Mass., Fremont, Neb., Hart- ford, Conn., Holyoke and Lov^ell, Mass., Binghamton, N. Y., and Cleveland, O. Sometimes foreign drafts are used in payments of equal thousands only, as at Wilming- ton, Del, and Chester, Pa. About twenty-five per cent, of the clearing-houses of the United States settle by draft on another city, and about the same number settle by manager's check. About seventeen per cent, settle by cash alone, and four- teen per cent, with cash and manager's check or foreign drafts. The rest settle by a combination of two or more of the foregoing methods. Clearing-houses located in New England settle, as a rule, with drafts on Boston or New York, or both. Clearing-houses in the vicinity of Philadelphia usually settle by draft on that city or on New York, and those located in that part of the country lying east of the Mississippi River, settle, more or less, by draft on New York. Settlement is also made by draft on some of the larger interior cities, as Detroit and Omaha. CHAPTER VII CLEARING-HOUSE EXCHANGES Location of Clearing-houses — Arrangement of Furniture — Hour of Making Exchanges — Clearing Matter — Character of Indorsements — Messengers and Settling Clerks— Con- ducting the Exchanges — Determining Balances — Two Clearings a Day— Detroit Plan of Handling Collections. No city has more than one bank clearing-house. The location of the clearing-house is always as near the centre of the banking district as possible. It is especially im- portant that this should be so in a large city, where the banks are numerous, and often scattered over a consider- able area. None of the associations, except the one at New York, owns its clearing-house property. Instead, the various organizations occupy rented quarters, usually in one of the banks belonging to the association, and these they have equipped with the necessary furniture, stationery, and desks for the several members. The desks are sometimes arranged in straight rows, and sometimes in elliptical curves, and in a few cases they are placed like the desks in a school-room. It is not un- common in small places for the clerks to meet and make their exchanges around a table, and occasionally the same rule prevails in large centres. Many ingenious contrivances are wrought out in some of the exchange-rooms, as well, also, as unique features 47 48 CLEARING-HOUSES of decoration. For example, on the walls of the room at Buffalo is an ideal conception of the leading clearing- houses of the country, with New York in the centre and the large cities grouped around it. At Pittsburg the ar- rangement of the desks, lights, and manager's quarters is unexcelled for beauty and artistic taste, except it be at New York. The manager's desk is connected by a pneu- matic tube with the bank below, through which small sums of money are blown when needed to make change in the settlement of balances. At Providence there are two rows of desks, with that of the manager at the end. Each bank is represented by a single clerk. Immedialtely upon his arrival at the clearing-house he deposits with the manager's assistant a credit ticket, and then proceeds to deposit his items in stationary boxes, located on the desks of the members. Each clerk has a key to his own box, and, after distributing his checks, he takes his place on the inside of the row of desks and there performs the duties of a settHng clerk. Many of the smaller clearing-houses do not rent per- manent quarters, but the banks belonging to the asso- ciation act as clearing agents in rotation, the cashier or some other official of the bank where the clearings for the time being are made, acting as manager. At Hast- ings, Neb., for instance, the banks alternate weekly, at Jacksonville, 111., monthly, and at Bay City, Mich., once in two months. At Lowell, Mass., a clearing-bank is chosen at each iannual meeting of the association. Each clearing-house determines for itself the time when its daily exchanges shall be made, and as practically the only criterion in selecting an hour is the convenience so CLEARING-HOUSES of the several members, it is not surprising that there is a wide diversity among associations in this regard. From 8.30 o'clock in the morning, when the first exchanges are made at Philadelphia, Pa., the time varies to 3.15 o'clock in the afternoon, when the exchanges are made at Chattanooga, Tenn. All hours between these are oc- cupied, most of the associations, however, clearing before 12 o'clock. On Saturdays, in a majority of cases, clear- ings are made at an earlier hour than on other days, in order to enable the banks to close the business of the day earlier than usual. When the exchanges take place at 10 o'clock, or ear- lier, it is customary for the members to clear the items received in the morning mails, or, in some cases, to in- clude only the larger items so received, and to send those received in the afternoon and the smaller amounts, if any, left over in the morning, through the exchanges on the following day. But when the exchanges take place as late as 3 o'clock, most of the items received are cleared the same day. The rules regulating the kinds of matter to be cleared are by no means uniform. A few of the organizations specify in their articles of association what shall be con- sidered proper clearing-matter. Of such rules, the follow- ing, from the by-laws of a prominent Western clearing- house, is one of the most common : " Proper matter for clearing shall consist of checks, drafts, manager's certificates, certificates of deposit, de- mand or matured, and any other matter specially agreed upon, until notice is given to the contrary, and any bank clearing paper not proper shall be fined." CLEARING-HOUSE EXCHANGES 51 In some places certain kinds of items cannot be cleared unless certified on the previous day. For example, at Baltimore, Md., and Topeka, Kan., drafts, notes, and bills of exchange must be certified before being cleared; at Dayton, O., and Birmingham, Ala. (except in rare cases at the latter place), notes and bills of exchange must be certified; but in Holyoke, Mass., Los Angeles, Cal., Lowell, Mass., Springfield, Mass., Springfield, O., To- ledo, O., Worcester, Mass., and some other cities, notes, drafts, and bills of exchange are cleared without certifica- tion. With the occasional exception of a note payable at a bank, which bank advises the bank holding the note that it will pay the same, if sent through the exchanges, notes, drafts, and bills of exchange are not cleared at Cin- cinnati, O., unless certified on the previous day. A draft on a party located at a distance is occasionally cleared, the arrangement being made by telephone. Checks, ac- ceptances, coupons, and notes due are cleared at Chester, Pa. Only regular checks and drafts are cleared at Den- ver, Col. In addition to the regular checks, express money-orders are cleared at Des Moines, la., through a bank designated by the express company as its depository. At Fargo, S. Dak., the unusual custom prevails of sometimes clearing, in addition to the checks on city banks, items for out-of-town correspondents. For in- stance, Bank A sends through the exchanges to the other members the items which it has received on their corre- spondents; and the other members, in turn, clear the items which they hold on A's correspondents. All checks, notes, acceptances, or other items received by any member at New Haven, Conn., against an asso- Iff 52 CLEARING-HOUSES ciate member are proper matter for clearing. Any mem- ber at New Orleans, La., voluntarily accepting a cashier's check in settlement of a clearing-house balance, is not al- lowed to pass the check through the clearings. Notes and drafts are not sent through the exchanges at Rockford, 111., nor are notes and bills of exchange at St. Paul. As a rule, only regular checks are included in the exchanges at Savannah, Ga., and never drafts, notes, and bills of exchange. Usually notes, acceptances, and bills of exchange are certified at Scranton, Pa., on the morning of the day they are sent through the clearing- house. At Waco, Tex., only checks and manager's cer- tificates, certified, used in settlement of balances at the clearing-house, are passed through the exchanges. In the exchanges at Washington, D. C, all checks may be cleared and all sight drafts, certificates of deposit, matured acceptances payable at the bank, and any other matter certified or specially agreed upon, until notice is given to the contrary; but promissory notes cannot pass through the exchanges unless certified or authorized by the member-bank where the same are payable. The rule at Youngstown, O., is that only items, which on their face are unconditional demands upon a bank, are payable through the clearing-house. The question of restricted indorsements has been widely discussed in banking journals and at bankers' con- ventions, especially in recent years, and, as a measure of self-protection, most of the large clearing-house associa- tions have adopted resolutions, declaring that items bear- ing restricted indorsements, such as " For Collection," " For Account of," " For Credit of," and " For Deposit," / CLEARING-HOUSE EXCHANGES 53 shall be considered improper matter for clearing, unless specially guaranteed by the clearing-bank. Items in- dorsed in bank, or " Pay to the order of ," or '' Pay to or order," are not regarded as bearing restrictive indorsements. Each bank, before sending its exchanges through the clearing-house, is required to indorse them with its num- ber and the words " Received payment through the Clearing-house," or such other indorsement as the clearing-house committee or the association may deter- mine upon. Evidently it would require a prodigious amount of labor to write the indorsements upon the items, and, indeed, it would be a physical impossibility in many of the banks of the large cities to do so. Hence, an ofBcial stamp is used and the same is usually accepted as a guarantee of all previous indorsements, whether written or stamped. It is not construed as supplying or guaranteeing to supply a missing indorsement. The number of messengers required to transport the exchanges to and from the clearing-house varies widely in different cities. When the business is light, as in some of the smaller cities, one person acts as both messenger and settling clerk, while in some of the larger cities the exchanges of some of the banks are so heavy that four or five messengers are necessary to transport them. Each bank, in addition, is represented by one settling clerk, who, as a rule, is a young man, quick and accurate in arithmetical calculations. Checks are taken to the clearing-house, bound to- gether with rubber bands, or enclosed in large envelopes, the items that go to each of the other members being 54 CLEARING-HOUSES kept separate. If the bulk is not too great, they are often carried in the hand, but it is customary in the large cities to transport them in leather bags or cases. The usual rule is that, immediately upon his arrival at the clearing-house, the settling clerk shall deliver to the manager, or the assistant manager, a ticket containing the amount of the items brought from his bank. An ex- ception to this rule, in a large clearing-house, is found at Baltimore, where the clerks, instead of delivering tickets, call ofif the amounts to the manager, while he enters them upon his proof-sheet. An important exception is also found at Cincinnati, where no entries of any kind are made by the manager upon his settling sheet until the proof has been made. This done, the clerks report their credit and debit balances, and these alone are entered. Before the exchanges begin at West Superior, Wis., there is a roll-call of the clerks. The only advantage in this unusual procedure would be the detection of the ab- sence of a member, and as this must necessarily appear before the exchanges are completed, it seems to be an unnecessary expenditure of time. A fine is usually imposed upon a member for being late at the clearings, and if the representative fails to appear before a specified time, the member is excluded from the exchanges of the day, and must make its clearings at the counters of the other banks. The fines commonly vary from one dollar to five dollars, but at Milwaukee they are unusually high. For the first five minutes or part thereof, the fine in that city is three dollars; for the sec- ond five minutes or part thereof, te^ dollars; and over ten minutes late, twenty-five dollars. CLEARING-HOUSE EXCHAN Two methods of delivering items in the exchange- room are in vogue. In the one case they are delivered by all the clerks simultaneously; in the other, by each clerk as soon as he arrives at the clearing-room; but the exchanges must all be made before a specified time. When the clerks begin the exchanges at the same time, they all start upon the signal from the manager, with their items on their arms, or in bags or cases strapped over the back, and proceed in the same direction, pass- ing along the desks until they have deposited all their paper. In the large cities, where the clerks are numerous, order and method in delivery are necessary to prevent confusion and to save time. But in small cities, where the clerks usually deliver their items as soon as they ar- rive, more liberty is allowed in personal conduct; also by this method an opportunity is afforded to the less proficient clerks to arrive early and list their items as fast as they are delivered from the other banks. Where the exchanges are made around a table, without any net-work or division of any kind between the clerks, it sometimes happens that bundles of items, thrown care- lessly on the table, are entered by the wrong clerk. To prevent errors of this character, at Cincinnati four dif- ferent colors are used for slips containing lists of items and attached to the exterior of the bundles, all the slips on the bundles going to a particular bank being of the same color. Thus, clerks representing members num- ber one, two, three, and four, sitting alongside of each other at the table, have different colored slips, and the same colors are used, correspondingly, by members num- ber five, six, seven, and eight, and so on around the table. "1 -T^ C\ ^y^ Si CLEARING-HOUSES Also the debit and credit slips brought by the settling clerks are of different colors. The speed with which the business of a clearing-house is transacted seems almost incredible. The actual time required to make the exchanges varies from one and one- half minutes to ten minutes. When the exchanges are made simultaneously, the time varies, as a rule, in pro- portion to the number of members. In view of the short- ness of the time required to make its exchanges, the New York Clearing-house afifords, perhaps, the best ex- ample in existence of the success of modern business methods, as compared with the old ways of doing things. The clearances exceed on the average one hundred mill- ion dollars a day, and yet this enormous amount of paper is exchanged between the banks in ten minutes, and often in less time. When the clearings have been made, the next step is for each settling clerk to determine the amount of the bal- ance of his own bank, which is found by taking the dif- ference between the amount brought to the clearing- house and the amount taken away. There is practically no exception to this rule. A certain amount of time is allowed for the proof, and for each error remaining un- discovered at the expiration of the allotted time a fine is usually imposed. At the end of a certain time thereafter it may be doubled, and still later it is often quadrupled. In some cases the settling clerks do not remain until the proof is made, but leave for their respective banks as soon as they make out their tickets for the amounts brought, amounts received, and balances. If the man- ager or his assistant in charge of the proof-sheet finds, CLEARING-HOUSE EXCHANGES^ '^^ after he has made all the entries and additions, that his work does not prove, he first determines whether the error was made by one of the settling clerks or by him- self. If by one of the clerks, it is usually discovered in a short time at the bank, whereupon the latter reports the error to the manager at the clearing-house, either by messenger or by telephone. If the bank fails to report the error in due time, the manager takes the credit and debit slips and finds it. At Cincinnati no fine is imposed upon a clerk or his bank for an error in a slip, if it is discovered and reported promptly to the manager. At Louisville, however, a fine of two dollars is imposed, without regard to time limita- tions. All that has been said thus far applies to those clearing- houses that clear only once a day. But there are in the United States five clearing-houses that make practically two clearings a day. These are at Philadelphia, Pa., Fall River and New Bedford, Mass., Detroit, Mich., and San Francisco, Cal. The details regarding the exchanges at Philadelphia are set forth in the chapter on the Philadel- phia Clearing-house. At Fall River an amendment was made to the Constitution, May 2.y, 1895, as follows: " The cashier of the clearing-house shall be the man- ager of the clearing-house, and the settling clerks shall be under his direction while at the clearing-house. An exchange of checks and other items for clearing shall be made daily at 11 o'clock a.m., and the final clearing at 1.30 P.M. The debtor members shall pay to the manager of the clearing-house the balances against them by 2 p.m., and on or before 2.15 o'clock the creditor members shall 58 CLEARING-HOUSES receive the respective balances dne them, except that there shall be but one clearing on Saturdays, at 1 1 o'clock A.M." The first clearing at Fall River is made at 1 1 o'clock, in order that the book-keepers at the banks may have most of the checks for entry as soon as possible. This is simply an exchange of checks, notes, and drafts, pay- able at the bank, and they are thus placed at the bank where they are payable before noon. The footings of this clearing are carried on the various slips to the second clearing at 1.30 o'clock, when balances are settled. This has been the custom ever since the inauguration of the clearing-house. At New Bedford, however, from the date of organiza- tion in September, 1888, until February, 1890, there was but one clearing a day, namely, at 12 o'clock. For some months prior to the annual meeting in February, 1890, there had been considerable opposition to clearing at that hour, on the part of one member of the association, be- cause thereby it was obliged to carry over, occasionally, large amounts of checks on other banks, taken in pay- ment of notes and cotton-drafts, for which in some cases it was required, by special arrangement with correspond- ent banks, to remit at par upon the day of payment. So strong was this opposition that the question finally threat- ened to disrupt the organization, and, as a compromise measure, it was at last decided to change the hour to I o'clock for a final clearing, which nominally was and still is the hour of closing for the national and savings banks of the city. At the same time a preliminary ex- change was provided for, the same to take place at 12 CLEARING-HOUSE EXCHANGES 59 o'clock, and this arrangement worked with partial suc- cess until March, 1895, when the hour for the preliminary clearing was changed to 11.30. This was done in order to facilitate the work of the book-keepers in entering the greater part of the day's items. This preliminary exchange at New Bedford includes all checks received in the ordinary course of business before 1 1 o'clock, including those received through the early mails, together with the notes and acceptances ma- turing that day. Probably ninety per cent, of the day's items are thus disposed of before the final clearing. The latter includes comparatively few items, although they frequently exceed in amount the items of the preceding exchange, since cotton-drafts and corporation notes are usually paid between 12 o'clock, noon, and i o'clock. The association at Detroit, Mich., pursues a method in handling collections unlike that followed anywhere else in the United States. By Section 12 of the Constitution of the Detroit Clearing-house, the hour designated for making the exchanges is fixed at 12.15 P-^- There is, however, a previous exchange at 9.30 a.m., which was authorized by amendment to Section 12 of the Constitu- tion, on November 30, 1898. The following is the text of the amendment: " Precisely at 9.30 o'clock a.m. on each secular busi- ness day, except Saturday, a representative from each member shall be present at the clearing-house, and at that hour such representatives shall deliver to the repre- sentative of each of the other members the promissory ' notes, acceptances, drafts, or other obligations due and payable on that day at the of^ces of the several members. 6o CLEARING-HOUSES Such notes, acceptances, drafts, or other matured paper shall be accompanied by a separate list for the mem- ber at whose of^ce it is paid. A duplicate list shall be checked and receipted by the messenger representing the member at whose office the obligations thereon listed are payable, and such receipted list shall be handed back to the representative of the member delivering the items, as above. Precisely at 3 o'clock p.m. a representative of each member shall be present at the clearing-house, and settle with the representatives of such members as shall have delivered items to his bank at the morning meet- ing of that day, either by returning such items or the proceeds thereof in the shape of the obligation or obliga- tions of his bank payable through the exchanges of the following day. The representative of the member with whom such settlement is made shall surrender to him the receipt taken at the morning meeting for such items; the surrender of such receipts to be an acknowledgment that all items thereon listed have been properly accounted for. " The manager of the clearing-house shall have charge of the representatives of the members at the meetings for the purpose indicated, and the same fines shall be im- posed for failure to be properly represented promptly at any meeting, for errors, or for disorderly conduct, as the members are liable for in the clearing of exchanges; and the work of delivering obligations or settling therefor shall not be delayed longer than five minutes. " In case of the failure on the part of any member either to return all the obligations received by it or to ac- count therefor as provided above, such action shall be CLEARING-HOUSE EXCHANGES 6l considered an infraction of the rules of the clearing-house, and a fine of two dollars shall be imposed for every such infraction. '' In case of failure of any member to be represented on the morning of any day, such member shall deliver to the other members at their respective ofBces the obliga- tions due on that day, listed and to be receipted for; but such obligations may be settled for at the afternoon meeting, and, in case of failure of any member to be prop- erly represented at the 3 o'clock meeting for settlement, such member so failing to be on time shall, before 3.15 o'clock, deliver to the other members settlement for the obligations due on that day." CHAPTER VllI CLEARING COUNTRY CHECKS The Growing Use of Checks — The Small Percentage of Actual Money Used in Business — The Difficulty of Country Checks — Remedies Proposed — State and National Clearing- houses — The Long Island • Experiment — The Success at Sedalia, Mo. The use of bank-checks and drafts in business transac- tions in the United States is more extensive than in any other country, and the tendency to such use is constantly on the increase. So popular have checks and drafts be- come that the increase has more than kept pace with the increase in business, which means that the proportion of money in use to the volume of business transactions has been on the decline. The use of checks and drafts is proportionately greater in the large financial centres than in the small towns. According to reports made by the national banks to the Comptroller of the Currency in 1881, the receipts in New York City, on June 30th of that year, were made up of ninety-eight and seven-tenths per cent, checks, drafts, etc., and one and three-tenths per cent, gold coin, silver coin, and paper money. In other cities the checks and drafts were 94.38 per cent., and the money 5.62 per cent. In the country out- 62 CLEARING COUNTRY CHECKS 67 the Long Island banks. Thus the Queens County Bank has practically become a clearing-house for the exchange of paper between the country banks of Long Island and metropolitan banks, and that the latter regard it as a saving of both time and money is evident from the fact that most of the banks continue to make their exchanges through that channel. What has recently been put in operation in Boston is another instance, and this vi^ill be found described in de- tail in another part of this volume. CHAPTER IX TYPICAL JOURNEY OF A COUNTRY CHECK REMITTED FOR A CITY ACCOUNT The Small Amount of Work Required of Payer and Payee— The Large Amount of Work Required of the Bank in which the Check is Deposited and its Correspondent — What the Receiving Bank Does— What its Regular Correspondent in the City Nearest the Country Bank is Required to do — What the Country Bank has to do — An Illustrative Example. By way of emphasizing the need of reform in the matter of collecting country checks, a brief glance at the meth- ods current, in various directions, at the present time will be advantageous. A merchant in Massillon, O., buys a bill of goods in New York, amounting to two hundred and fifty dollars, and pays for the same with a check on his local bank. The New York jobber from whom the goods were bought makes the proper entries in his records for the check, upon its receipt by him, and deposits the check with his (New York) bank. The receiving teller of the bank in which the check is deposited, after checking it off the deposit slip, enters it, by amount only, in his record of out-of-town checks. Another clerk enters the check on a sheet headed with the depositor's name, stating date of deposit, place of 68 TYPICAL JOURNEY OF A COUNTRY CHECK 69 payment, and amount for the purpose of making the proper charge thereon. The slip is sent to the jobber, ad- vising him of the charge. The charge itself is made through a book known as the debits of exchange from which the book-keeper posts the charge. A representative of the corresponding department of the bank receipts for the item on the receiving teller's record, after satisfying himself that the amount has been properly listed thereon. Another representative sorts the check with others on a sorting table, according to place of payment, and then stamps the bank's indorsement on the back of the check. The check is then laid on the collection enclosure sheet for transmittal to- a Cleveland bank, since all Massillon items are collected through that channel by this particular New York bank. The check is next listed on the en- closure sheet, and the footing of the letter containing this item is charged to the collection account of the Cleve- land bank. A record of the item is then made in the foreign cash register, under the account of the bank of Cleveland to which it is forwarded for collection. This record consists of the date sent, the name of depositor, the name of drawer, name of payer, place of payment, and amount, together with any instructions which are to accompany the item, regarding the handling of the same. After all these details have been completed, the name of the Cleveland bank is filled in on the indorsement stamp. A record is then made on the letter register, showing the name of the Cleveland bank, date when the collection letter is sent, and the total amount of the items 70 CLEARING-HOUSES contained in the letter. This record is made in order that the work of the bank may be facihtated in keeping track of its remittances, so that should an acknowledgment of the same not be promptly received, a tracer may be sent out without delay to secure the desired information. Manifestly, it is essential to the bank to know that all letters containing enclosures are promptly and properly acknowledged. An envelope is then addressed, the let- ter folded and enclosed, the envelope sealed and stamped, and finally examined to see that it is properly addressed, sealed, and stamped. The letter is then mailed at the New York Post-of^ce. The Cleveland bank, on receipt of this letter, enters in detail upon its books those items contained in it which are payable outside of Cleveland. It then writes a letter to its Massillon correspondent, enclosing the two hun- dred and fifty dollar check for collection, makes a record of the letter and enclosure, addresses an envelope, in which are placed the letter and enclosure, and seals, stamps, and mails the letter. The Cleveland bank next acknowledges the receipt of the item, by drawing and remitting a check on its New York correspondent for the amount, less the usual charge for exchange. It writes a letter, enclosing the check, takes a record of the same, addresses an envelope, puts in the enclosures, then seals, stamps, and mails the letter. The check thus received by the New York bank is checked off the remittance letter, is stamped with the paid stamp of the collecting bank, is listed upon a slip with the other items received by the bank the same day upon the other New York bank on which the check TYPICAL JOURNEY OF A COUNTRY CHECK 71 received by it is drawn. The items thus made up are col- lected through the clearing-house. The paying bank checks off the items paid through the clearing-house from the slip on which they are listed, examines the check in question to see that it is properly drawn, dated, and signed, and that the signature is genuine, charges the check to the Cleveland bank's account on its books, can- cels the check, enters the checks on a voucher-list, and at the end of a given period returns the check to the Cleve- land bank. The Cleveland bank, upon receiving its account cur- rent, voucher-list and cancelled vouchers, immediately checks off the vouchers and verifies the statement of ac- count. It then compares the checks with the stubs in the check-book, and examines the checks themselves to as- certain if the indorsements are correct or if any altera- tions have been made thereon, and at last files the checks away for future reference, including the one that has been used in this particular case under consideration. The letter from the Cleveland bank to Massillon, con- taining the item, is mailed the same day that the check is received from New York. It is received in Massillon the day following. After carefully examining the check to see that it is properly drawn and dated, and that the signature is genuine, the Massillon bank charges the check to its customer's account and then draws its check on Cleveland, less the usual charge for exchange, in pay- ment of the same. It next writes a letter, enclosing the check, takes a record of the same, addresses an envelope, puts in the enclosures, and then seals, stamps, and mails the letter. dFTHE \ OF ;2 CLEARING-HOUSES The customer in due course has his account made up, checks off the cancelled checks returned by the bank from the voucher-list, compares the checks with the stubs in his check-book, examines the checks to ascertain if the indorsements are correct or if any alterations have been made, and finally files them away for future reference. The Cleveland bank, upon the receipt of the remittance from its Massillon correspondent, completes its records by filling in the date of the receipt of the remittance and the amount of exchange charged by the Massillon bank. The check thus received is listed by the Cleveland bank upon a slip containing all the items received by it the same day upon the other Cleveland bank on which the check is drawn. The items thus made up are then collected through the clearing-house. The paying bank checks off the items paid through the clearing-house from the slip on which they are listed, examines the check in question to see that it is properly drawn, dated, and signed, and that the signature is gen- uine, charges the check to the Massillon bank's account on its books, cancels the check, enters the check on the voucher-list, and at the end of a given period returns the check to its correspondent, the Massillon bank. The Massillon bank, upon receiving its account cur- rent, voucher-list, and cancelled checks from the Cleve- land bank, immediately verifies the statement of account, compares the checks with the stubs in the check-book, and examines the checks themselves to ascertain if the in- dorsements are correct or if any alterations have been made in them, and finally files the checks away for future reference. •soaa pJBAVpOOjW 74 CLEARING-HOUSES In order to effect the collection of the afore-mentloned check, drawn on a country bank and remitted to New York in payment of an account, two checks had to be drawn; four letters had to be written; four cents in in- ternal revenue stamps were used; eight cents in postage- stamps were used, and seventy-five or more handlings of the checks were involved by a score or so of clerks, in five different banks, located in three different cities. Lest the picture should seem to be overdrawn — for, in fact, that which has been presented is only an average case — the following account of the actual travels of a check, of much smaller size and drawn upon a bank much nearer New York than Massillon, is submitted. It is il- lustrated by a reduced fac-simile of the check itself and the indorsements that it received in transit. The check, which was for forty-three dollars and fifty- six cents, was drawn by Woodward Brothers, of Sag Harbor, N. Y., and paid to Berry, Lohman, & Rasch, of Hoboken, N. J., who deposited it in the Second National Bank of Hoboken. This bank sent it to Harvey Fisk & Sons, of New York, who, having no regular correspond- ent in the neighborhood of the bank on which it was drawn, sent it, along with other collections, to their Bos- ton correspondent, the Globe National Bank. The Globe National Bank of Boston, for reasons that are not appar- ent, sent it, presumably with other items, to its corre- spondent at Tonawanda, N. Y., namely, the First Na- tional Bank of that city. The Tonawanda bank, evidently realizing that the check had wandered far out of its course, and in an effort to get it nearer home, transmitted it to the National Exchange Bank of Albany, which insti- ^^« first nT' ""''""^ WlZ' J^'^^/^E, BANKER. *o»toni or orrfer. ^^nfc of Hofioken. 'PAYli^TH^OyEROF ^.^^^TEBf^^,: lionai Bi BANKER^ T^ ST TheSeSnd'Hati'^n^VbanK OF HOBOKEM, PRIOR ENDORSEMENTS GUAKANTCED Pay Any National or State Bank. ^ OR ORDER. GLOBE NATL BAIJK. BOSTON ci C v: c o — ^ ^ o 'i ^ o C/3 1 ^, ^ o OJ bfl u .s 4 O J:, a. 5 o •eMT^^oOT c[MT.^a©iii M®i a o .c .s « U ^ ^ .2 o I 90 CLEARING-HOUSES The usual resolutions were passed by the Clearing- house Association, authorizing the issue of certificates, and on September 226. the first issue was made. The amount was fixed at the outset at ten million dollars, which, with the announcement that the government would purchase the same amount of bonds, caused an immediate subsidence of the panic, and in less than three days its most acute stages were over. The last issue was made on November 20th, a little less than two months from the date of the first issue, and the last cer- tificates were redeemed January 14th of the following year, the period covered from the date of the first issue to the date of final cancellation having been less than four months. During the two months referred to, certificates to the amount of twenty-six million five hundred and sixty-five thousand dollars were issued. This was far in excess of any previous issue, the nearest approach to it having been in 1861, when, as shown before, more than twenty-two million dollars were taken out. The largest amount outstanding at any one time was twenty-two million four hundred and ten thousand dollars, which oc- curred only eleven days from the date of issue of the first certificates. Interest was calculated at seven per cent., as in i860, the rate during the intervening time having been six per cent. Bills receivable, stocks, bonds, and other securities were accepted by the committee as collaterals for the redemption of these certificates. Attempts on the part of the business community were made in vain to discover what banks had taken out cer- tificates, but such information was very wisely withheld. For more than two months, covering the worst period of CLEARING-HOUSE LOAN CERTIFICATES 91 the panic, no weekly statements of their condition were made to the clearing-house by the banks, the object being to prevent a general knowledge of the weak condition of some of the members, which condition, if disclosed, would invite runs upon them. On September 2^, 1873, a meeting of the Boston As- sociation was called, and it was voted to suspend currency payments, and appoint a loan committee, with power to issue loan certificates to the amount of ten million dol- lars, upon substantially the same basis as at New York. The issues were duly made, and on October 20th the amount outstanding reached its maximum of ap- proximately four million eight hundred thousand dol- lars. In like manner, the Philadelphia Association now, for the first time, entered upon the plan so successfully fol- lowed in New York since i860, by appointing a loan committee, with authority to issue clearing-house loan certificates. Such certificates were authorized by resolu- tion, adopted September 24, 1873, and amended Octo- ber 18, 1873, to read as follows : " For the purpose of enabling the banks, members of the Philadelphia Clearing-house Association, to afTord proper assistance to the mercantile and manufacturing community, and also to facilitate the inter-bank settle- ments resulting from their daily exchanges, we, the undersigned, do bind ourselves by the following agree- ment on the part of our respective banks, namely : "First. That the clearing-house committee be and that they are hereby authorized to issue to any bank, member of the association, loan certificates bearing six per cent. 92 CLEARING-HOUSES interest on the deposits of bills receivable and other securities to such an amount and to such percentage thereof as may in their judgment be advisable. These certificates may be used in settlement of balances at the clearing-house, and they shall be received by creditor banks in the same proportion as they bear to the aggre- gate amount of the debtor balances paid at the clearing- house. The interest that may accrue upon these certifi- cates shall be apportioned monthly among the banks w^hich shall have held them during that time. '' Second. The securities deposited with the said com- mittee shall be held by them in trust as a special deposit, pledged for the redemption of the certificates issued thereupon, the same being accepted by the committee as collateral security, v^ith the express condition that neither clearing-house association, the clearing-house committee, nor any member thereof shall be responsible for any loss on said collaterals arising from failure to make demand and protest, or from any other neglect or omission other than the refusal to take some reasonable step v^hich the said depositing bank may have previously required in wanting. " Third. On the surrender of such certificates, or any of them by the depositing bank, the committee v^ill in- dorse the amount as a payment on the obligation of said bank held by them, and will surrender a proportionate amount of securities, except in cases of default of the bank in any of its transactions through the clearing-house, in which case the securities will be applied by the committee, first to the payment of outstanding certificates with in- terest; next to the liquidation of any indebtedness of such COMMITTEE.- 1 I I i S o .2 t 1 1 1 i I 1 1 1 i I ss [xvoijij-izao Jfiro-T s^ s€ (!$ OK THi: UNIVf^RsiTY P^^ a\^. 94 CLEARING-HOUSES bank to the other banks, members of the Clearing-house Association. '' Fourth. The committee shall be authorized to ex- change any portion of said securities for others, to be approved by them, and shall have power to demand ad- ditional securities at their own discretion. '' Fifth. That the clearing-house committee be au- thorized to carry into full effect this agreement, with power to establish such rules and regulations for the practical working thereof as they may deem necessary; and any loss caused by the non-payment of loan certifi- cates shall be assessed by the committee upon all the banks in the ratio of capital. '' Sixth. The expenses incurred in carrying out this agreement shall be assessed upon the banks in equal pro- portion to their respective capitals. " Seventh. That the clearing-house committee be and they are hereby authorized to terminate this agreement, upon giving thirty days' notice thereof, at any stated meeting of the Clearing-house Association." The issue of certificates made in conformity with the foregoing resolution reached the maximum amount out- standing at one time, namely, six million two hun- dred and eighty-five thousand dollars, on December i, 1873. At Baltimore, on September 24th, the clearing-house association began the issue of certificates, which amounted in the aggregate to one million three hundred and twenty-six thousand dollars. The last of these was retired January 2, 1874, one hundred days after the date of the first issue. CLEARING-HOUSE LOAN CERTIFICATES 95 The first certificates at St. Louis were issued on Sep- tember 25th, and the last of the certificates were cancelled forty-six days thereafter, the aggregate amount having been one million four hundred and seventy-two thou- sand five hundred dollars. At New Orleans the maximum amount outstanding (one million and sixty-seven thousand dollars) was at- tained October loth. On September 25th the following resolution was adopted by the association at Cincinnati : '' Resolved, That for the protection of our commercial interests and for the purpose of preventing a drain of cur- rency from the banks and bankers of this city, the banks and bankers of Cincinnati do hereby agree to adopt sub- stantially the plan adopted in New York City, namely, they will not pay out currency on checks, except for small sums, to be optional with the banks and bankers on whom they are drawn; but they will certify checks drawn on balances in their hands, payable through the clearing- house only. When such checks are drawn in payment of notes or drafts, the bank holding the same shall not be required to deliver said paper until after the check in payment has been paid to the clearing-house. " Resolved, That the above resolution be printed, and slips furnished each bank and banker. ''Resolved, That the Clearing-house Association will is- sue not to exceed two million five hundred thousand dol- lars in loan certificates, to be used in settling balances between the members thereof, and that the same will be furnished to members in the proportion of securities put up by each as hereinafter provided. Said certificates shall 96 CLEARING-HOUSES not be negotiable, and shall be used only for the purpose of settlement between the banks and bankers in the clear- ing-house. " Resolved, That members may deposit as a basis of credit in the association the following described securi- ties, namely, United States bonds, railroad and other bonds, stocks and bills receivable. The United States bonds shall be received at their par or face value, and the other securities shall be valued by a committee of five, who shall be appointed for that purpose, and the same shall be received at seventy-five per cent, of the value so fixed. Each member shall receive a receipt for the se- curities deposited. The said committee shall have charge of the securities of whatsoever kind deposited by the said banks and bankers, and shall place the same with the safe deposit company for safe-keeping, and the said commit- tee shall sit daily at the clearing-house at the hour for clearing and shall personally supervise the issue of the loan certificates in settlement of balances. The said cer- tificates shall bear interest at the rate of eight per cent, per annum, which interest shall be paid by the banks and bankers using the same and for the time so used. " Resolved, That these proceedings take efTect from and after 9 o'clock to-day, and are not to affect currency transactions or obligations between members prior to this day." In the period from September 25th, when the issue of certificates was authorized, to October 9th, when a reso- lution was unanimously adopted in favor of discontinuing their issue, a period of only fourteen days, certificates to the amount of five hundred and fifteen thousand four CLEARING-HOUSE LOAN CERTIFICATES 97 hundred dollars were issued, the last of which were can- celled just six weeks from the date of first issue. The next report of clearing-house loan certificates was in 1879, when the New Orleans Association alone issued a small amount (fifty-four thousand dollars) to satisfy con- ditions of a purely local character. In 1884 the New York Association stood alone in the issue of loan certificates. The amount taken out at this time was large, and was begun early in the year to pre- vent a wide-spread and disastrous panic. The first were taken out May 15th, and reached twenty-one million eight hundred and eighty-one thousand dollars, their maximum amount outstanding on May 24th, only nin^e days from the date of first issue. The last certificates were issued June 6th, and the last were retired September 23d, more than four months from the date on which the issue was begun. The total amount was twenty-four million nine hundred and fifteen thousand dollars, being in excess of any previous issue, except that of 1873. The rate of interest was fixed at six per cent., the same as in 1 86 1, 1863, and 1864, and, as security for the redemption of such certificates, bills receivable, stocks, bonds, and other securities were employed. For the next six years the country was free from any unusual financial disturbances, and hence no occasion arose for extraordinary measures. Finally, however, in 1890, came another period of pressure. Up to midsum- mer of that year the country had experienced unusual prosperity, but to the observing eye it was apparent that deep-seated forces were at work, which would ultimately cause a wide-spread disturbance in business and financial 98 CLEARING-HOUSES circles, if not bring about a disastrous panic. This was evident from consideration of the unsatisfactory condi- tions prevaiHng in agriculture and from the unwholesome tendency to overtrading and expansion on every hand. The extension of railroads had been prosecuted through- out the year with more than ordinary vigor, which re- quired the extension of large sums of money upon se- curity. Early in the year the deposits in the banks of New York City began to fall off, and by May 17th the shrinkage had amounted to more than forty-four million eight hundred and thirty-one thousand dollars, of which over thirteen million five hundred thousand dollars con- sisted of balances drawn out by banks in the interior and in other reserve cities. Boston and Philadelphia were also subjected to heavy drains. After careful considera- tion, it was decided in each of these three cities to resort to the issue of clearing-house loan certificates, to be used in the settlement of clearing-house balances. New York was the first to take action, and on November nth, at a meeting of the association, the following resolution was unanimously adopted : " Resolved, That a committee of five be appointed by the chair, of which the chairman shall be one, to receive from banks, members of the association, bills receivable and other securities to be approved by said committee, who shall be authorized to issue therefor to such deposit- ing banks, loan certificates bearing interest at six per cent, per annum, and, in addition thereto, a commission of one-quarter of one cent for every thirty days such cer- tificates shall remain unpaid, and such loan certificates shall not be in excess of seventy-five per cent, of the mar- CLEARING-HOUSE LOAN CERTIFICATES 99 ket value of the securities or bills receivable so deposited, and such certificates shall be received and paid in settle- ment of balances at the clearing-house." In pursuance of the authority thus granted, the com- mittee of five was duly appointed, and they proceeded to issue to applying banks loan certificates in form sub- stantially the same as that employed in 1873 — elsewhere illustrated — which, in fact, with the exception of the limitation of time, is the form standard with this asso- ciation. The first certificates were issued November 12, 1890, and the issue ceased December 22d, amounting in the aggregate to sixteen million six hundred and forty-five thousand dollars; the largest amount outstanding at any one time was fifteen million two hundred and five thousand dollars, on December 12th, and the last certifi- cates were retired February 7, 1891, less than three months from the date of first issue. In order to provide for the retirement of these certificates, in case the col- lateral should be found insufificient, the boards of di- rectors of the several associated banks passed the follow- ing resolution : " Resolved, That any loss resulting from the issue of loan certificates shall be borne by the banks comprising the Clearing-house Association, pro rata to capital and surplus, and this resolution shall be ratified by the boards of the respective banks, members of the association, and a certified copy of such consent delivered to the chairman of the loan committee." On November 27th, five days after special action was begun by the Clearing-house Association of New York, lOO CLEARING-HOUSES the clearing-house association at Boston entered upon a similar course, by passing the following resolution : '' Resolved, That a committee of five be appointed by the chair, of which committee the chairman also shall be a member, to receive from banks, members of the association, bills receivable and other securities, to be ap- proved by said committee, who shall be authorized to is- sue therefor, to such depositing banks, loan certificates bearing interest at 7.3 per cent, per annum, and such loan certificates shall not be in excess of seventy-five per cent, of the market value of the securities or bills receiv- able so deposited, and such certificates shall be received and paid in settlement of balances at the clearing-house." It is worthy of remark that the basis upon which the payment of any loss arising from the issue of loan cer- tificates differed from that at New York, in that in the one case it was required to be paid by the banks in pro- portion to capital and surplus, and in the other in pro- portion to the average daily amount of exchanges which each bank had sent to the clearing-house during the pre- ceding year. The resolution bearing upon this point, adopted at Boston, was as follows : " Resolved, That any loss arising from the issue of loan certificates shall be borne by the banks comprising the Clearing-house Association, pro rata according to the average daily amount which each bank shall have sent to the clearing-house during the preceding year." It was also voted that this resolution should be ratified by the boards of directors of the respective banks, mem- bers of the association, and a certified copy of such con- sent delivered to the chairman of the loan committee. CLEARING-HOUSE LOAN CERTIFICATES lOI Upon deposit of securities with the clearing-house committee and the receipt of certificates therefor, each bank was required to execute and dehver an obHgation in the following form : " The Bank has this day received of loan committee of the Boston Clearing-house Association, loan certificates issued by said committee in pursuance of a vote of said association, passed November 17, 1890, to the amount of thousand dollars, and has deposited with said committee the securities, a statement whereof is hereto annexed, and said bank has received said loan certificates on the terms set forth in said vote, and agrees to pay the amount of said certificates, with interest thereon, as provided in said vote." The first certificates were taken out November 19th, two days after the adoption of the resolution authoriz- ing such action, and the last were issued December 6th, when the amount reached its maximum of five million and sixty-five thousand dollars. The last of the issue were finally cancelled January 6, 1891, less than two months after the first issue. On November 18, 1890, similar proceedings were had by the Clearing-house Association of Philadelphia, at which time the following resolution was passed : " Resolved, That in accordance with resolution of Sep- tember 24, 1873, as amended October 18, 1873, the clear- ing-house committee will issue loan certificates to banks applying, and receive them in payment of balances." The resolution of September 24, 1873, ref 0> Committee. o o s 3 O Si •SHv/noa ONVsnoHi 3Aid lo6 CLEARING-HOUSES same kind of collateral as in 1873, 1884, and 1890. The aggregate amount was far in excess of any previous is- sue. The next largest amount was in 1873, the aggre- gate, it will be remembered, having been less than twenty- seven million dollars. Beginning with i860, the issues of clearing-house loan certificates at New York, alone, have amounted to the enormous aggregate of one hun- dred and sixty-eight million seven hundred and seventy- four thousand dollars, all of which have been redeemed without the loss of a single dollar, and in periods ranging from three to seven months from the date of first issue. The Boston Clearing-house Association, by resolu- tion, authorized a similar course, and on June 27th the committee began the issue of certificates in denomina- tions of ten thousand dollars and five thousand dollars, respectively, bearing interest at y.}^ per cent., the same rates as in 1873 and 1890. From August 23d to September ist the amount was at its maximum — eleven million four hundred and forty- five thousand dollars. The aggregate issue was eleven million six hundred and forty-five thousand dollars, which, it will be observed, is somewhat in excess of one- quarter of the amount taken out at New York. From June 27th, when the first issue was made, to the end of the period, balances were paid at the clearing-house with certificates to the extent of forty-three million one hun- dred and thirty thousand dollars, which was 38.4 per cent, of the total balances at the clearing-house during the time the certificates were used. By far the largest amount of certificates was employed in September, and so far as single days are concerned, the maximum was Io8 CLEARING-HOUSES reached September 7th and 9th, the amount on each of these days having been one million and sixty-five thou- sand dollars. By October 21st the certificates had all been retired and cancelled. In pursuance of a resolution of the association at Phil- adelphia, a loan committee v^as appointed, which issued certificates in denominations of five thousand dollars only, bearing interest at six per cent., as in 1873 and 1890. The total amount of the issue was eleven million four hundred and seventy thousand dollars, being less by only a small amount than the total issue at Boston. The larg- est amount outstanding at any one time was ten million nine hundred and sixty-five thousand dollars, on August 15th, all of which was redeemed in due time without loss to any of the members. At Baltimore certificates in denominations of one thou- sand dollars, three thousand dollars, and six thousand dollars were issued, bearing interest at six per cent. From August 24th to September 6th the certificates outstand- ing were at their maximum of one million four hundred and seventy-five thousand dollars, all of which were ulti- mately retired and cancelled. The Clearing-house Association at New Orleans fol- lowed the action at New York as closely as possible. On June 22d a resolution was unanimously adopted as fol- lows: " Resolved, That a committee of six banks be appointed by the chair to receive from banks, members of the asso- ciation, bills receivable and other securities to be ap- proved by said committee, who shall be authorized to issue therefor to such depositing banks loan certificates U O I lo CLEARING-HOUSES bearing interest at seven per cent, per annum, and such loan certificates shall not be in excess of seventy-five per cent, of the market value of the securities or bills receiv- able so deposited, the committee reserving the right to call for additional security as in their judgment the same is required; and such certificates shall be received and paid in settlement of balances resulting from the ex- changes at the clearing-house, and all the rules and reg- ulations heretofore adopted in the issue of such cer- tificates shall be in force in the present issue. It is expressly agreed and understood that no bank which shall have received certificates shall make any new loans or dis- counts, but shall confine its business to the collection of outstanding loans, until all clearing-house certificates shall have been retired." Certificates were accordingly issued in denominations of five hundred dollars to ten thousand dollars. On the day of the passage of the above resolution it was also " Resolved, That any members of this association now out of line in their reserve shall immediately take steps to put themselves in line, and that any members desiring to avail themselves of the use of clearing-house certifi- cates shall not be allowed to increase their line of dis- counts." Also on June 22d the committee addressed to the cash- iers of the several associated banks the following com- munication : " The undersigned beg leave to advise you that they have accepted the appointment extended to them by the meeting of the associated banks, held at the clearing- house this day, to act as a loan committee, and that as CLEARING-HOUSE LOAN CERTIFICATES m such committee they will meet daily at the clearing-house at II o'clock A.M. on and after Thursday, the 22d inst., prepared to issue loan certificates in accordance with the action adopted by the meeting referred to. Banks desir- ing to receive loan certificates on pledge of bills receivable or other securities to be deposited with the committee, are requested to make application for such certificates at or before 1 1 o'clock a.m. in the form herewith enclosed, to the chairman of the committee at the clearing-house, with a certified copy of a resolution of their board of directors, in the form enclosed, authorizing the deposit and pledge of securities for loan certificates. You are requested to report daily to the manager of the clearing- house each morning at ten o'clock the amount of certifi- cates held by your bank." One striking feature of the above communication which does not appear in the resolutions and communi- cations in other similar associations, is that banks are re- ferred to as acting in a joint capacity instead of as in- dividuals. Soon after the above action was taken, a resolution was passed by the boards of directors of the several associated banks as follows : " Resolved, That the president or cashier be and is hereby authorized and empowered to deposit, pledge, or hypothecate with the loan committee of the associated banks of New Orleans, United States stocks, bills re- ceivable, or other securities belonging to this bank as collateral security for any loan or loans made to the said bank by that committee.'* Applications to the loan committee for certificates were made by members in form as follows : 1 1 2 CLEARING-HOUSES " The applies for the issue to them of loan cer- tificates to the amount of $ to be secured by the deposit of collateral security as per security herewith sent." Before taking out loan certificates the several members ratified the action of the association in authorizing their issue, in the following manner : " Resolved, That as a member of the New Orleans Clearing-house Association, the action of said associa- tion in the matter of issuing clearing-house certificates is hereby ratified and confirmed, with all of its provisions." To intrench themselves against loss in the event of failure on the part of any member of the association tak- ing out loan certificates to redeem the same with the stipulated interest, each member was required to execute and deliver an obligation, of which the following is a copy: ** This certifies, That the National Bank of the City of New Orleans is indebted to the New Orleans Clearing-house Association in the sum of dollars, paid by said association to said bank on the faith hereof, and in consideration thereof said bank hereby agrees to pay said sum with interest from the date thereof, at the rate of seven per cent, per annum to the said association or to its assigns, and said association is hereby authorized through its loan committee or otherwise, to sell at public auction or private sale, on three days' notice to said bank, the securities deposited by said bank with such as- sociation, in accordance with the resolution of such asso- ciation, in pursuance of which this certificate is issued." As a further measure of protection to the members in u 114 CLEARING-HOUSES the event of any emergency arising, not otherwise pro- vided for, it was further " Resolved, That any loss arising from the issue of loan certificates shall be borne by the banks comprising the Clearing-house Association, pro rata of capital and surplus; and this resolution shall be ratified by the boards of the respective banks, members of the association, and a certified copy of such consent delivered to the chair- man of the loan committee." In addition to this, a resolution was passed, limiting the amount of payment by any member of the clearing-house association to a single person in any one day to one hundred dollars. The largest amount of certificates out- standing at any one time was nine hundred and ninety- eight thousand dollars, covering one week from Septem- ber 7th to September 14th, all of which were finally retired without loss to any member. The Cincinnati Clearing-house likewise issued loan certificates in 1893, and the form employed at that time is given among the illustrations. All of the associated banks at Buffalo took out certifi- cates in 1893 in denominations of five thousand dollars and one thousand dollars, bearing interest at six to eight per cent., but they did not all use them. The form em- ployed was substantially the same as that used at previous dates in New York. The sum total of the issue was nine hundred and eighty-five thousand dollars, with which balances were settled to the amount of two million seven hundred and eighty thousand dollars. In July, forty per cent, of the balances were paid with these certificates, and fifty per cent, in August. From July 9th the amount ^etsE uBf^^ P/^ sxrvrraa tixvx^ioaE aua> Il6 CLEARING-HOUSES outstanding reached its maximum, nine hundred and twenty-five thousand dollars. Only ten out of nineteen members of the Clearing- house Association at Pittsburg took out loan certificates in 1893. The total amount issued was nine hundred and eighty-seven thousand dollars, being only two thousand dollars more than the issue at Buffalo. The first were taken out August nth, and the last were retired No- vember loth, the full amount of the issue having been outstanding on September 15th. The certificates bore interest at six per cent. A loan committee was appointed by the chairman of the Clearing-house Association of Detroit, upon vote of the association authorizing such action, and certificates bearing interest at seven per cent, were issued to members applying for the same, in denominations of one thousand dollars. A sample of the certificate employed is presented in reduced fac-simile among the illustrations. The amount attained a maximum of three hundred and sixty thousand dollars on September i ith. In Section 8 of the constitution, provision in case of loss resulting from de- fault in payment by a member of the obligation executed and delivered upon receipt of loan certificates and from failure to realize a sufficient amount from the securities held as collateral to the obligation, is made as follows: '* Fifty per cent, of the loss shall be pro-rated among the members on the amount of the capital stock, and the residue of the balance of loss shall be assessed pro rata the aggregate amount which the several members have sent to the clearing-house during the time any of such certificates of deposit may have been outstanding." CLEARING-HOUSE LOAN CERTIFICATES 117 The Atlanta Clearing-House Association passed a reso- lution, August II, 1893, referring the matter of issuing clearing-house loan certificates to a special committee, and on August 15th a communication from the Chamber of Commerce was entertained, requesting the issuance of clearing-house loan certificates, whereupon a com- mittee of three was appointed to act as trustees for the receipt of collateral securities, and for the issuance of such certificates to the extent of sixty-six and two-thirds per cent, of the collateral deposited. On August 17th a new manager was appointed, who, under direction of the trustees, took active charge of is- suing the certificates. The largest amount out at any one time was one hundred and twenty-seven thousand dollars. All were redeemed by November ist, save about twenty dollars, which at last accounts were still outstanding. The denominations were five dollars, ten dollars, one hundred dollars, and five hundred dollars. A sample of the largest denomination is presented on another page. Two things are characteristic of the Atlanta certificates which are not to be found in any of those heretofore dis- cussed. In the first place they were issued to the extent of only sixty-six and two-thirds per cent, of the collateral deposited as compared with a minimum of seventy-five per cent, in the other associations; and in the second place it is to be noted on the certificates that they " will be re- ceived on deposit or in payment of debts due any bank in said clearing-house " — an implication that they were used for general circulation, which, indeed, is true. In June, 1893, the Clearing-house Association at Bir- mingham, Ala., appointed a committee to inquire into the 1 1 8 CLEARING-HOUSES best methods for relieving the situation, which was ag- gravated by a run on one of its members about a month previous to that time, and the committee recommended the use of clearing-house loan certificates. In addition to this, the association passed resolutions similar to the one passed at New Orleans, limiting the amount of actual cash each member should pay to a customer on any one day to one hundred dollars, which was afterward reduced to fifty dollars, and providing a penalty for violation. The denominations of loan certificates first used were one thousand dollars, five hundred dollars, one hundred dollars, fifty dollars, ten dollars, and five dollars, re- spectively. Like the certificates in Atlanta, they were intended for general circulation among the customers of the banks, but unHke any certificates previously mentioned, they 'were issued to the extent of only fifty per cent, of the collateral required. Customers at first received them with much reluctance, but they soon found that the mer- chants would take them for debts and for merchandise, that the banks would take them on deposit and accept them in payment of notes. To obtain cash, persons com- menced to buy small bills of goods with them, expecting to receive money in change. This checkmated the mer- chants, and they called on the association for smaller de- nominations. Hence certificates of two dollars, one dol- lar, fifty cents, and twenty-five cents were subsequently issued. No other association in the United States com- pares with the one at Birmingham in the comprehensive- ness of its currency system and in the extent to which it was projected on this occasion. A fac-simile of one of I gguuuutKJtTOtJrnr^uuurn::^^ 3 o x: I C §§i::iax:iaiaaaaiaaai;;u^^ 1 20 CLEARING-HOUSES the smaller certificates is presented among the illustra- tions. On August 22, 1893, the following resolution was adopted by the Clearing-house Association at Richmond, Va. : " Resolved, That the committee have certificates pre- pared in denominations of one dollar, five dollars, and ten dollars, in handsome form, ready for use at such time as this association may hereafter determine, said certifi- cates to be payable on demand after ninety days through the clearing-house, to bear three per cent, interest per annum, and to be secured by deposits of collateral as by former resolution, interest to cease after ninety days." The certificates were duly prepared in compliance with the authority thus given, but were never used. The Clearing-house Association at Chattanooga, Tenn., resorted to loan certificates in 1893, the only time in the history of that organization that it has done so. Besides the loan certificates issued in 1893, there was a considerable amount of emergency circulation taken out by the banks in the Southeast, under the title of " Clear- ing-house certificates," in cities where no clearing- houses existed. In adopting the name of clearing-house certificates, it was not the purpose of the banks to prac- tise deception on the people, but to indicate what was really true and what the term would seem to imply, namely, that such certificates were temporary loans made by the banks associated together, and that the banks were pledged for their redemption. The denominations in the cities referred to were : Albany, Ga., ten dollars, five dol- lars, and one dollar; Chester, S. C, ten dollars, five dol- O CO ^ 10 ^ CO BJ 1/ I- DJ U lU o E CD Eoc- E<.£ O CliJ b£ = O -t-J T" ^ ^co i° CO Rj -o >, -t-» Co I- O (0 -M O ^& ■M O O CO © a «c S^ O tf> 10 ^ Brt) »••»•.•••••• 3 O I © < E-^ JZ c bfi c c^ © i- © 5 5 5 QQ 55g ■J .— »^ © © ^ ■2 CO a = 3: CO? ^ © E ^ ti c\S ^§" col = |l £fE o 5 ••••••••••••••••••••••••••••< 1 22 CLEARING-HOUSES lars, and one dollar; Columbia, S. C, fifty dollars, twenty dollars, ten dollars, five dollars, two dollars, and one dol- lar; Danville, Va., one hundred dollars, fifty dollars, twenty dollars, ten dollars, five dollars, two dollars, and one dollar; Newman, Ga., ten dollars, five dollars, and one dollar; and Rock Hill, S. C, five dollars, two dollars, and one dollar. There is no doubt that the relief afforded in this manner was of great public assistance in the several communities where it was given, effecting results similar to those accomplished by the actual clearing-house loan certificates in the great centres. In 1895 came another period of depression, especially in certain localities, but by no means so disastrous nor so permanent as the panic of 1893. Such was the pressure at Boston, however, that the clearing-house association authorized the issue of loan certificates, which were taken out to the extent of two hundred and thirty-five thousand dollars, the last of which were retired March 12, 1896. In like manner, at Philadelphia an issue was made aggre- gating eight million two hundred and twenty thousand dollars. In 1896, at New Orleans, alone, clearing-house loan certificates were issued, this having been the eleventh time that resort to such measures had been made since the history of clearing-houses in this country began, less than a half century ago. The largest amount of certifi- cates outstanding at one time was three hundred and ninety-nine thousand dollars, and was attained on Sep- tember 4th. The last of the certificates were retired and cancelled November 17th. The occasion for the issue at this time was, no doubt, the disturbance in business cir- CLEARING-HOUSE LOAN CERTIFICATES 123 cles arising from the presidential contest, which, always a disturbing factor, was in this year unusually exciting. Thus the New Orleans Clearing-house Association en- joys the unique distinction of having on two occasions — 1879 and 1896 — been the only association to issue loan certificates. The method of calculating interest on certificates has been in many associations a source of much dif^culty. In some instances the clearing-houses have taken no cog- nizance of the interest whatsoever, but left the members free to adjust it for themselves. It is clear that the inter- est, like the balances, must consist of credits and debits w^hich exactly equal or offset each other. That is to say, the interest charged against certain members for the cer- tificates taken out by them must exactly equal the inter- est paid to the members holding the certificates. It was not a difficult matter to keep a proper record of the in- terest to be charged against the members, for the clear- ing-house committee knew to whom and in what amounts they had issued certificates, and it was necessary only to calculate the interest at the stipulated rate on the full amount of the certificates issued to the several members for the time they were outstanding, and to place the same to their debit; but to know what members held certifi- cates issued to other banks and in what amounts after the settlement of balances therewith began, was to many a source of confusion. The New York plan has been perhaps the most com- plete and satisfactory, and was followed by many of the associations. Each member was required to send to the clearing-house each morning a statement of the amount k 124 CLEARING-HOUSES of certificates on hand. In a book kept for the purpose these amounts were entered to the credit of the banks, each account being kept on a separate page. At the end of the month footings were made of the certificates held by each bank for that time, and the total divided by the number of days the certificates were outstanding. This gave the average amount of certificates on hand for the given time, and upon this amount interest was calculated at the rate agreed upon and placed to the credit of the bank. Drafts were then drawn upon the banks to whom certificates had been issued for the interest due by them. In turn checks were sent to the banks holding certifi- cates for the interest due to them. The same plan was followed at Philadelphia, but at Boston each member calculated daily the interest due on the certificates held, and sent to the clearing-house with the certificates to be used in settlement of balances a ticket containing a statement of the interest due for the time the certificates were held. At Bufifalo the interest was calculated daily and settled weekly by draft of the manager on debtor banks in favor of creditor banks. At Louisville, Ky., the interest on the certificates taken out in 1891 was calculated by the bank, the clearing-house taking no cognizance thereof whatsoever. The rate was fixed at nine per cent, for two days — virtually eighteen per cent. — and was placed at such an exorbitant figure to prevent the banks which took advantage of such certificates from expanding their loans at a higher rate of interest than they were paying on their loan certificates. In all such cases the question might arise as to th( CLEARING-HOUSE LOAN CERTIFICATES 125 disposition of the interest charged against members on certificates taken out but never used. It is only necessary to say in reply that it was the common practice to charge each bank with the full amount of certificates taken out and to credit said bank with the full amount of certificates held to whomsoever they might have been issued. ^ The credit and debit interest, therefore, on certificates issued to any member, but never used, would exactly balance. Owing to a popular misconception of the character and purpose of clearing-house loan certificates, much adverse criticism regarding them has been indulged in, espe- cially in 1893, on the ground that such issues were made in violation of the ten per cent, prohibitive tax on bank- note currency other than national bank-note circulation. Such objection was based on the assumption that clear- ing-house loan certificates were a form of national bank currency — an assumption which is ill founded, both in theory and in fact. The certificates were essentially tem- porary loans made by the banks banded together as a clearing-house association to the members of such asso- ciation, and were available to such banks only for the purpose of settling balances due from and to each other. In the words of the Comptroller of the Currency, they were but due bills, and their sole function consisted in dis- charging the single obligation at the clearing-house. An , attempt on the part of a bank in any of the associations issuing these certificates to use them otherwise would have incurred a fine and other penalties provided in the rule governing such association. In no instance, except- ing those mentioned in the South, were they designated to serve as money, and nowhere else did they circulate as 126 CLEARING-HOUSES money. Hence the courts of Pennsylvania decided that they should not be regarded as money. The imposi- tion of a tax upon them, therefore, would have been not only a serious blow to one of the most effective and in- genious contrivances for the deliverance of the country from the throes of panic that has yet been devised, but would also have been a direct violation of the spirit of the law. CHAPTER XI THE NEW YORK CLEARING-HOUSE Origin and Early History — Formal Organization in 1853 — First Location — New York Clearing-house Building Company— Cedar Street Property — Constitutional Provisions— Com- mittees — Statistics of Membership— Clearing for Non-mem- bers— Statements of Condition— Capitalization of New York Banks — Records of Clearing-house. Notwithstanding the magnitude of the transactions at the New York Clearing-house, and the important part that it plays in banking economy, very little is known about it outside of banking circles. The business com- munity is not familiar with its functions, and the public in general knows very little of its operations. While the exchanges are enormous, the method is simple and easy to comprehend. It is the purpose of this chapter, there- fore, to inquire into its origin and trace its growth and constitutional development. To the end that the reader may be the more fully prepared to comprehend its true significance, it is necessary, by way of introduction, to pass in review the methods of exchange employed by the New York banks prior to its establishment. J\ During a comparatively short period immediately fol- lowing 1849 the number of banks in New York in- creased from twenty-four to sixty. In the daily course of business each bank received checks and other items 127 128 CLEARING-HOUSES on each of the other banks, which had to be presented for collection. All such items on hand were assorted and listed on separate slips at the close of the day, and items coming in through the mail on the following morning were added at that time. To make the daily exchanges each bank sent out a porter with a book of entry, or pass- book, together with the items to be exchanged. The receiving teller of the first bank visited entered the exchanges brought by the porter -on the credit side of his book and the return exchanges on the debit side, who then hurried away to deliver and receive in like manner at the other banks. It often happened that five or six porters would meet at the same bank, thereby retarding each other's progress and causing much de- lay. Considerable time was consumed in making the circuit. Hence the entry of the return items in the books of the several banks was delayed until the after- noon, at an hour when the other work of the bank was becoming urgent. A daily settlement of the balances was not attempted by the banks, owing to the time it would have required, but they informally agreed upon a weekly adjustment, the same to take place after the exchanges on Friday morning. At that time the cashier of each bank drew a check for each of the several balances due it, and sent a porter out to collect them. At the same time the por- ter carried coin with which to pay balances due by his bank. After the settlement had been made, there was a meeting to adjust differences and bring order out of chaos. An old bank of^cer (J. S. Gibbons), in describing the I THE NEW YORK CLEARING-HOUSE 129 inconveniences and defects of this system, says that some of the more speculative banks took advantage of the weekly method of settlements by carrying a line of discounts to an amount greater than their legitimate resources would allow. Thus a bank would manage to carry a small debit balance of two or three thousand dollars with thirty or more institutions, making a total debit balance of, say, one hundred thousand dollars on which it discounted paper. It was the practice to bor- row enough on Thursday to make the settlements on Friday, and the return of the loan on Saturday threw it again into the debtor column. Virtually, therefore, the weekly settlements were nominal only, and to show that there was no attempt at economy of time and labor in making them, it is only necessary to say that the cashier drew a check for every balance due him, whereas a draft on one bank in favor of another might have settled two accounts at once. ^ The banks were at liberty to draw on each other for their credit balances without waiting for the settlements on Friday, and hence, when specie was needed, this was not infrequently done. But so far did many of the banks extend their loans and discounts that a single small draft by one bank on another would induce a gen- eral drawing and involve them all in confusion and virtual war on each other. Three o'clock would arrive, with the line of drafts incomplete, thus enabling debtor banks ofttimes to add fifty thousand dollars to their specie, whereas creditor banks would find themselves at the close of the day depleted in perhaps twice that sum. The desirability of a substitute for such a system had I30 CLEARING-HOUSES long been realized, but as yet no plausible scheme had been proposed. As early as 1831 a plan had been sug- gested by Albert Gallatin, which, to a very remarkable degree, coincided with the one ultimately adopted. His proposition occurs in a pamphlet of one hundred and twenty-four pages, entitled, '' Suggestions on the Banks and Currency of the Several United States in Reference Principally to the Suspension of Specie Payments," and is so significant that we quote it in full : " There is a measure which, though belonging to the administration of banks, rather than to legal enact- ments, is suggested on account of its great importance. Few regulations would be more useful in preventing dangerous expansions of discounts and issues on the part of the city banks, than a regular exchange of notes and checks, and an actual daily or semi-weekly payment of the balances. It must be recollected that it is by this process alone that a bank of the United States has ever acted or been supposed to act as a regulator of the cur- rency. Its action would not in that respect be wanted in any city, the banks of which would, by adopting the process, regulate themselves. It is one of the principal ingredients of the system of the banks of Scotland. The bankers of London, by the daily exchange of drafts at the clearing-house, reduce the ultimate balance to a very small sum ; and that balance is immediately paid in notes of the Bank of England. The want of a similar arrange- ment among the banks of this city produces relaxation, favors improper expansions, and is attended with serious inconveniences. The principal difficulty in the way of an arrangement for that purpose is the want of a com- THE NEW YORK CLEARING-HOUSE 131 mon medium other than specie for effecting the payment of balances. Those are daily fluctuating; and a per- petual drawing and re-drawing of specie from and into the banks is unpopular and inconvenient. " In order to remedy this, it has been suggested that a general cash office might be established, in which each bank should place a sum in specie, proportionate to its capital, which would be carried to its credit in the books of the office. Each bank would be daily debited or credited in those books for the balance of its account with all the other banks. Each bank might at any time draw for specie on the office for the excess of its credit beyond its quota; and each bank should be obliged to replenish its quota, whenever it was diminished one- half, or in any other proportion agreed on. " It may be that some similar arrangement might be made in every other county, or larger convenient district of the State. It would not be necessary to establish then a general cash office. Each of the banks of Scot- land has an agent at Edinburgh, and the balances are then settled twice a week, and paid generally by drafts on London. In the same manner the balances due by the banks in each district might be paid by drafts on New York or any other place agreed on." These extracts contain the very quintessence of the clearing-house system. A regulation " belonging to the administration of banks rather than to legal enact- ments " comprehends the clearing-house constituted as a private and voluntary association, unchartered, and in fact unknown to the law. The remedy for the " danger- ous expansions of discounts and issues " and for the '' re- /^ 1 32 CLEARING-HOUSES laxation and serious inconveniences " is afforded by the very system which he proposed; and the '' want of a com- mon medium other than specie for effecting the payment of balances " which was the '' principal difficulty in the way of an arrangement for that purpose," strikingly sug- gests the clearing-house gold coin and legal tender cer- tificates in use at the present day. The problem of the '' unpopular and inconvenient system of drawing and re- drawing specie from and into the banks " has met its solution in the clearing-house, and the '* general cash office, in which each bank should place a sum in specie," is represented in the present coin depository. The proposition that the specie deposited by each bank should " be carried to its credit in the books of the office," savors of the London, rather than of the Ameri- can, plan. The extension of the clearing-house system is a partial fulfilment of the remark that " some similar arrangement might be made in every other county or larger convenient district of the State," and the absence of the coin depository in the smaller cities is in keeping with the idea that '' it would not be necessary to establish a general cash office in such places." The payment of balances in most of the smaller clearing-houses, by drafts on New York and other large centres, is a remarkable confirmation of the idea that " balances due by the banks in each district might be paid by drafts on New York or any other place agreed on." But the times were not ripe for the scheme thus pro- posed. Mr. Gallatin was thinking in advance of the age. More than twenty years passed by before his fellow- bankers could appreciate the wisdom of his suggestions. THE NEW YORK CLEARING-HOUSE 133 In time, however, the question began to be more gen- erally discussed. For nearly a year it was under con- sideration, and finally it was deemed advisable to call a meeting to take decisive action upon it. On August 23, 1853, sixteen presidents, one vice-presi- dent, and twenty-one cashiers, representing thirty-eight banks, assembled in the directors' room of the Mer- chants' Bank, and at this meeting a resolution was passed providing that " a committee be appointed to pro- cure or hire a suitable room in or near Wall street, for the purpose of holding meetings of the of^cers of the city banks; that the said committee be requested to sub- mit a plan at an adjourned meeting of this body, to sim- plify the system of making exchanges and settling the daily balances; and that when a room is procured or hired for the above purpose, the president or cashiers be requested to meet weekly until a plan is agreed upon." In compliance with this request, the committee pre- sented a plan for the daily settlement of balances, at a meeting held on August 31, 1853, which plan was amended so as to provide " that a room be procured for that purpose, sullficiently large to afTord suitable accom- modations." On September 13, 1853, the scheme was adopted and the committee was " clothed with full power to hire a room, appoint a manager and clerks, and make all the necessary arrangements to carry the plan for a clearing- house into efifect." On October 4th the date for begin- ning operations was fixed for October nth. Accord- ingly, on the appointed day, the representatives of the banks, members of the association, met in a room which UNIVERSITY 134 CLEARING-HOUSES had been procured in the basement at No. 14 Wall Street, and made the first exchanges. The total clearings on that day were twenty-two million six hundred and forty- eight thousand one hundred and nine dollars and eighty- seven cents, and the balances were one million two hun- dred and ninety thousand five hundred and seventy-two dollars and thirty-eight cents. These clearings have since been eclipsed by over thirty millions of dollars in the totals of a single bank. The clearing system in America was thus fairly launched, and from that time forth its success exceeded the expectations of even its most ardent projectors. The association consisted at that time of fifty-two banks, banded together for their common good, which, as they then conceived, consisted solely in the exchange of items and settlement of balances at a uniform time and place. For nearly a year the operations were conducted without a constitution. The adoption of such an instrument was opposed, on the ground that it was not needed and might lead to a dangerous concentration of power in the hands of a few managers, who might use it for per- sonal aggrandizement, or for the exercise of an arbitrary supervision. But the need of fixed rules of some sort for their guidance became more and more urgent, and on February 28, 1854, one of the bank officers '' recom- mended that an act of incorporation be obtained for the clearing-house, or that some other form of organization be adopted, with a constitution and laws for its govern- ment, providing for regular meetings of bank officers." A constitution was drafted by George Curtis, and upon June 6, 1854, it was adopted and ordered sent to THE NEW YORK CLEARING-HOUSE 135 the several banks for their action. Upon August ist it was signed by each of the members and thereby put into full force and operation. This instrument, with the changes that have been made from time to time by the adoption of amendments and resolutions, is in force at the present day. The subject of proper accommodations for the trans- actions of the clearing-house was frequently considered. As already shown, the original location was fixed at No. 14 Wall Street, but the quarters were not entirely suitable, and hence, on May i, 1854, the seat of oper- ations was transferred to No. 82 Broadway. At a meet- ing held in May, 1857, a committee was appointed to consider the subject of removal from that locality. One month later the committee reported in favor of occupy- ing a room in the building of the Bank of New York, at No. 48 Wall Street, and their report was adopted. In March, 1858, the association first met in the new rooms. At a meeting held five years thereafter, the question of removing to a more central location was discussed, but it was voted to be inexpedient to consider the subject of removal at that time. At a meeting on the 24th of June, 1868, a committee was appointed to select suitable rooms for the use of the clearing-house and meetings of bank officers; and the chairman of the committee, in his report to the associa- tion on October 15, 1869, stated that they "had been unable to find such rooms; but that the building then being erected by the Equitable Life Insurance Com- pany, on Broadway, corner of Cedar Street, had been under consideration, but it was found that sufficient and 136 CLEARING-HOUSES suitable room could not be had in that building, and rec- ommended that the association purchase a building and fit it up to meet the wants of the clearing-house and the banks." At a subsequent meeting the committee was requested by resolution to renew their efforts to procure suitable rooms. Meanwhile the association had been accumulating a building fund, which by October, 1874, amounted to over ninety thousand dollars. Some time expired before an opportunity offered for the purchase of available property. Finally, the Na- tional Bank of the Commonwealth Building, on the cor- ner of Nassau and Pine Streets, was advertised to be sold at public auction on October 13, 1874, and the com- mittee was instructed by a vote of forty-one to five tc purchase it at any price that was satisfactory to it. Ac- cordingly, the committee attended the sale and pur- chased the property for two hundred and fifteen thousand dollars. In payment of this sum, seventy-five thousand dollars was borrowed on the securities in the hands of the com- mittee, and for the remaining cost and contemplated improvements in the building, a draft was made upon the associated banks, at the rate of twenty-two-one-hun- dredths of one per cent, on their respective capitals. In return therefor each bank received a certificate from the trustees, with the stipulated agreement that it should re- ceive thereafter a proper consideration for the amount advanced. Subsequent drafts were made upon the members, in proportion to their capital, as in the previous instance, for the purpose of defraying the cost of im- provements, including the furniture and fixtures of the THE NEW YORK CLEARING-HOUSE 137 new building. The drafts in total amounted to three- tenths of one per cent, of the respective capitals of the banks. In return for the amounts so advanced certifi- cates were given as before. The bank building was properly altered and equipped for the transactions of the clearing-house, and on June 17, 1875, the premises were occupied. Here the clear- ing-house remained for the next twenty-one years. At a meeting of the association, April 20, 1892, the atten- tion of the clearing-house committee was called to the probable necessity of securing before many years a larger and more commodious building for clearing- house purposes. As the result the committee was in- structed to consider the matter and report. The same committee, in conjunction with the trustees, was author- ized at a meeting on December 29, 1893, to acquire for use of the association the property known as 79 to 83 Cedar Street, and to sell the property on the corner of Pine and Nassau Streets. A meeting of the association was held January 16, 1894, when it was unanimously resolved " that the clear- ing-house committee be authorized to organize a cor- poration to take title to the property just purchased, to be known as the New York Clearing-house Building Company; to draw upon all the banks represented, in proportion to their respective capitals and surplus, for all money needed to pay for the said property, and for the erection, fitting up, and furnishing of a building thereon, suitable for the use of the association; to issue to each of the banks so paying a receipt for such pay- ment, in such form as shall be approved by counsel, and 1 38 CLEARING-HOUSES to apply the money so received to the purchase of the said land, and to supply the said building company with funds to defray the cost of the erecting and furnishing of the said building." A form of receipt was adopted, certifying that the bank specified therein had paid to the Clearing-house Association the sum named toward the purchase of the real estate in Cedar Street for the use of the banks, mem- bers of the association, and that the said bank is entitled to interest upon the said amount at the rate of five per cent., and further providing that the bank shall not trans- fer the certificate while a member of the association; and if it shall at any time cease to be a member, then the asso- ciation shall have a prior right to purchase the certifi- cate at a price not exceeding the amount named and interest. The Cedar Street property was duly bought and the corporation organized to take the title. The capital stock of the corporation was fixed at nine hundred thou- sand dollars. For this nine thousand shares were issued —eight thousand nine hundred and seventy-five in the name of the president of the Clearing-house Associa- tion, and twenty-five in the name of the five directors of the Clearing-house Building Company, who held the same in trust. The banks paid to the clearing-house committee the full amount of the shares, for which, in turn, they received the certificates. In addition, the sum of two hundred and thirty thousand dollars was col- lected from the members as a final assessment for the erection of the new building, and for this amount cer- tificates were issued in due form, and these, with the New York Clearing-house. I40 CLEARING-HOUSES nine hundred thousand dollars previously issued, made one million one hundred and thirty thousand dollars of certificates outstanding. The final report of the com- mittee showed that the cost of the building was one million ninety-nine thousand five hundred and sixty-nine dollars and seventy-two cents. The new building, two views of which are given here- with, in which the association took up its abode in the middle of January, 1896, is built of white marble, in the Italian Renaissance style. It is an adornment to the city and is one of the architectural gems of the world. Thus we have seen that the association occupied four different locations before coming into the structure erected for its own use; and that after each removal it remained longer than it had in the quarters just aban- doned. The constitution of the New York Clearing-house provides in full for the regulation of the affairs of the association and for the guidance of its members. A general meeting is held annually, and special meetings may be called by the clearing-house committee when- ever it may deem it necessary, or whenever it is requested to do so by any seven of the associated banks. A ma- jority of the whole number of associated banks consti- tutes a quorum. Each bank may be represented at all meetings of the association, and is entitled to one vote. The administration of the clearing-house is vested in a president, secretary, manager, assistant manager, and five standing committees. The president is elected by ballot, at the annual meet- ing, to preside at that meeting and all subsequent meet- New York Clearing-house. View down Cedar Street from a Point near Broadway. Taken when the Excavation for the American Exchange National Bank was in Progress. 142 CLEARING-HOUSES ings during the year. He is ex-oMcio member of all committees, except the committee on nommations. In his absence a chairman pro tern, is appointed. The secretary is elected at the same meeting, and it is his duty. to record the minutes of each meeting of the association. The manager, under the control of the clearing-house committee, has full charge of all business at the clearing- house, but before entering upon his duties he is required to give bond in the sum of ten thousand dollars. The clerks of the establishment, as well as the settHng clerks and porters of the several associated banks, while at the clearing-house, are under his direction. He super- intends the operation of clearing, the adjustment and settlement of balances, the keeping of the records of transactions as they take place from day to day, the preparation and publication of the weekly bank-state- ments, and, in a word, attends to all the detail work of the clearing-house. He imposes and collects fines from the members for the violation of clearing-house rules, and acts as secretary of all the committees when they meet at the clearing-house. Although the constitution provides for the appoint- ment of a manager annually, it is the custom to retain the same one in ofifice year after year. As a fact, there have been only three managers in the whole history of the association. The first, George D. Lyman, served until 1864, when he was succeeded by William A. Camp, who, after a long and honorable career of twenty-eight years as manager, resigned in 1892, and William Sherer, who had been assistant manager, was appointed to sue- View in Manager's and Assistant Manager's Rooms, New York Clearing-house 144 CLEARING-HOUSES ceed him. The present assistant manager is William J. Gilpin. The various committees of the clearing-house em- brace the clearing-house committee, the conference committee, the committee on admissions, the nominat- ing committee, and the arbitration committee. Each committee consists of five members. The first three committees were provided for in the constitution orig- inally adopted. The committee on arbitration was proposed in an amendment January ii, 1855, by George Curtis, who drafted the constitution. This amendment was subsequently adopted. On September 22, 187 1, the nominating committee was created by resolution. Besides these, a loan committee has been appointed on special occasions, whose functions are described in the chapter on clearing-house loan certificates. The clearing-house committee is clothed with almost absolute power, being second in authority only to the association itself. The ablest and most experienced bank officers, therefore, are usually chosen to serve on it. The committee is elected annually, and is charged with the responsibility of equipping the clearing-house with furniture, providing fuel, stationery, and what- ever else is necessary for the convenient transaction of its business, of appointing a manager and his subordinates, of establishing rules and regulations to be observed at the clearing-house, not provided for in the constitution, always, however, subject to the approval of the associa- tion, and of generally supervising the clearing-house afYairs. This committee has charge of the funds be- longing to the association, and draws on each bank for THE NEW YORK CLEARING-HOUSE 145 its quota of expenses. At the first meeting of the asso- ciation after the election of the committee it submits detailed estimates of the expenditures that will be re- quired for the clearing-house during the current year. It fixes the salaries of the clerks and approves the bonds which are required before they can enter upon their duties. It has power to remove the manager or any of the clerks, whenever it may deem it for the best inter- ests of the association so to do. The committee is also empowered to examine, if necessary, any member of the association, and to require therefrom securities of such an amount and character as may appear to it to be suffi- cient for the protection of the balances resulting from exchanges at the clearing-house. By resolution adopted October 14, 1890, this committee is empowered to per- mit or refuse to any member the privilege of clearing for an outside institution. It is directed, whenever in its judgment legal tender notes have been A^ithdrawn fron^ use through the agency of any bank, member of the association, to make an immediate examinarfTon of the bank in question, and should there appear to be com- plicity on the part of the bank or its officials, to suspend said bank from the clearing-house until the action of the association is taken thereon. The conference committee is annually elected, and its function is, in concurrence with the clearing-house com- mittee, to suspend any bank from the privileges of the clearing-house, in cases of extreme necessity, until the pleasure of the association is ascertained thereon. No such suspension, however, can take place unless a ma- jority, at least, of each of these two committees is present 146 CLEARING-HOUSES at the ordering thereof, or unless the vote be unanimous. In case of suspension, the committee is required to call a general meeting of the association to take the matter into consideration. The committee on admissions is appointed at each annual meeting by the president, and the clearing-house committee refers thereto for examination all applications for admission into the association. The nominating committee is chosen annually, and its duty is to present to the association at each annual meet- ing the names of candidates for president and secretary of the association, and for members of the clearing-house, nominating, and conference committees, on the following basis: The president and secretary are eligible for two successive years, and after an interval of one year they are again eligible in like manner. There must be selected every year at least two members on each of the committees (having still three old members), and those who have .been longest on the committees must go ofif first. If all have been on the same length of time, then two must go ofif by lot. After an interval of one year such members are again eligible. The arbitration committee is appointed annually by the president, and its function is to hear and determine all disputes submitted to it by both parties thereto, one or both of which are members of the association. It is the duty of this committee also to record a brief ab- stract of each case referred to it, together with its decis- ion thereon, in a book provided for that purpose, which book is kept at the clearing-house, open to the inspec- tion of all the members. THE NEW YORK CLEARING-HOUSE 147 The association at present consists of sixty-three mem- bers (forty-four national banks, nineteen State banks) and the United States Sub-treasury located at New York. The latter makes its exchanges only at the clear- ing-house, its balances being settled at its own counter. It has no voice in the government of the association, and pays a nominal sum for actual expenses. The privilege which the sub-treasury enjoys of making its exchanges through the clearing-house is a matter of great accom- modation both to the Sub-treasury and to the banks. The New York Post-office clears through one of the members, but renders no compensation to the associa- tion for the privilege. The membership of the association since its organiza- tion has been constantly changing, owing to the admis- sion and expulsion of members and voluntary with- drawals, as provided by the constitution. The association began with fifty-one members, but by 1858 the list had declined to forty-six, the lowest num- ber in the history of the clearing-house. A member- ship of sixty-seven was attained in 1895. On February 28, 1854, the Bank of the Union was ex- pelled, and the clearing-house committee was authorized to return to it whatever amount was necessary to ofifset its advances toward the expenses of the clearing-house. On the following December the Empire City Bank was expelled, and a similar resolution passed; but in no case thereafter were any such refunds made. The association came into existence, as has been stated, in 1853, but it was not until February 29, 1856, that the first additional bank was admitted, four banks 148 CLEARING-HOUSES having been expelled in the meantime. The list con- tinued to vary from this time forth, at irregular intervals, there having been in the entire history of the association forty-two admissions, ten expulsions, twelve withdrawals, and nine banks dropped. The constitution is very explicit in its terms regarding the admission and conduct of members. Applicants are first considered by the clearing-house committee and referred hence to the committee on admissions. The latter, if in its opinion the applicants are qualified for membership, refers them to the association for final action, a three-fourths vote of those present being neces- sary to admission. Banks may be elected to member- ship at any meeting of the association, but, before being considered by the clearing-house committee, each appli- cant must be shown to have a capital or combined cap- ital and, surplus of at least five hundred thousand dollars. Each new member is required to signify its assent to the constitution, in the same manner as the original mem- bers, and to pay an admission fee according to capital, as follows: A bank, the capital of which does not ex- ceed five million dollars, must pay five thousand dollars; a bank, the capital of which exceeds five million dollars, must pay seven thousand five hundred dollars. Any member increasing its capital is required to pay in ac- cordance with those rates. The admission charges have not always been the same. The original members paid no admission fee. In the constitution, as originally adopted, the rate was fixed at five hundred dollars. This was raised to one thou- sand dollars by an amendment adopted October ii, THE NEW YORK CLEARING-HOUSE 149 1854. Under the constitution, as revised in 1865, the fees were based on the capital as follows : For banks whose capital did not exceed five hundred thousand dol- lars, the rate was fixed at one thousand dollars; for those whose capital did not exceed one million dollars, at two thousand dollars; for those whose capital did not exceed two million dollars, at three thousand dollars; for those whose capital did not exceed three million dollars, at four thousand dollars; for those whose capital did not exceed five million dollars, at five thousand dollars; and for those whose capital exceeded five million dollars, at seven thousand five hundred dollars. On October 3, 1893, the amendment was adopted, fixing the rates on the present basis. The power of expulsion is lodged in the association, but can be exercised only by a majority vote of all the members. The power of suspension is vested jointly in the conference and the clearing-house committees. Any member may withdraw at pleasure after paying its due proportion of all expenses incurred and signifying its intention to withdraw to the clearing-house com- mittee. There were some fifty-seven banks in operation in New York when the clearing-house was organized, and all but five came into the association, those remaining outside being small institutions. Subsequently two or three of these applied for admission, but inasmuch as they were not deemed capable of meeting the require- ments imposed upon the existing members, they were rejected. At the present time sixty-two per cent, of the banks are members. In the city and vicinity are eighty- 150 CLEARING-HOUSES three banks and trust companies non-members, as com- pared with the sixty-three members. The nature of the business of the non-members, however, quite as much as that of member-banks, demands that their exchanges go through the clearing-house, and hence each such bank or trust company makes a special engagement with some member to act as its clearing agent, upon such terms of security as they may agree upon. At present there are seventy-three outside institutions making their ex- changes in this way. At the beginning the subject of clearing for non-mem- bers naturally did not attract much attention, but as the city grew in business importance and its banks increased in power and numbers, it began to be more seriously considered. Several amendments were made to the constitution, designed to regulate the action of non- members and determine their relation to members. - On January ii, 1855, George Curtis, to whom reference has already been made as tEe author of the constitution, pro- posed the first amendment on this subject, which was subsequently adopted as follows : " Whenever exchanges shall have been made at the clearing-house, by previous arrangement between ^mem- bers of the association, through one oLtheir number and banks in the city and vicinity who are not members, the receiving bank Qt the ckaring-house-shalLin no case discontinue the arrangement without giving previous notice, which shall not take effect until the exchanges of the morning following the receipt of such notice shall have been completed." It will be observed that no provision is made for the THE NEW YORK CLEARING-HOUSE 151 protection of banks against the insolvency of non-mem- bers, but that the clearing member is made responsible for the items drawn upon the non-member, and is pre- vented from discontinuing such responsibility until the. exchanges are completed on the day following the re- ceipt of such notice. The next resolution on the sub- ject was adopted ten years later, and is as follows: " Resolved, That no member of the Clearing-house Association shall be allowed to make the exchanges for or redeem the notes or checks of any other bank or banks not members of said association, without 'first giving notice, over the signature .of one of its ofificers, of the fact of such redemption; ripv shall such redemption be discontinued but upon notice in the manner prescribed by Section 25 of the constitution." Here for the first time a requirement was made of the banks that they should give notice of their intention to clear for non-members. Again, in the same year, an- other amendment followed. Thus: " Whenever any member of the association shall send through the clearing-house exchanges of any bank or banks in the city or vicinity who are not members, such sending shall ipso facto and without further notice con- stitute said member the agent for said bank or banks at the clearing-house; and said member shall be liable in the premises, the same as for its own transactions, and its liability in all such cases shall continue until after the completion of the exchanges of the morning next fol- lowing the receipt of notice of discontinuance of any such agency." This virtually repealed the former resolution requiring 152 CLEARING-HOUSES notice of the creation of a clearing agency. It con- tinued the requirement of a previous notice before dis- continuing such agency, and clearly established the measure of liability of the clearing member for the items of the non-member. As if to reinforce the above resolu- tion, another v^as adopted in May of the following year, as follows : " Resolved, That the liabilities of banks in the clearing- house doing business for the banks in the vicinity are, under the amendment to the constitution, passed April 26, 1865, the same as for their own transactions." Clearing for non-members continued for nearly a quar- ter of a century without further regulation. Finally, in 1890, new troubles arose from the failure of two small banks clearing through member-banks and the looting of the Sixth National Bank, a member. Accordingly, the whole subject of clearing for non-members was most carefully investigated and considered. Many favored its discontinuance altogether, and finally the question was referred to a committee. A majority of the committee reported in favor of discontinuance, and a minority in support of the prevailing plan. The association adopted the views of the minority and voted to continue on the existing basis. This led to the following resolution, adopted October 14, 1890: ''Resolved, That on and after January i, 1891, this association permits its members to make such exchanges only after the consent of the clearing-house committee is obtained; and the banks or parties have obligated them- selves to pay to the Clearing-house Association an annual payment of two hundred dollars, and also consent to the TY THE NEW YORK CLEARING-HOU?^'^'-'''^-^-^^^ same examinations as are now required of its members, provided, however, that nothing contained in this resolu- tion is construed as making such banks or parties mem- bers of the association." Thus, discretion regarding the clearing for non-mem- bers was taken out of the hands of the members and transferred to the clearing-house committee, and for the New York, 1900. At a meeting of the * Board of Directors, of the of. held 1900, the following Resolution was adopted : ^^ Resolved : That this Board hereby agrees to the payment of Five Hundred ($500) Dollars per annum, for the purpose of making its Exchanges through a Bank, member of the New York Clearing-house Association. '* And this Board also consents to the same examinations of this as are now required of members of the Clearing- house Association." * This title may be changed to read Board of Trustees, Executive Committee, etc.," as necessary. Resolution Authorizing Exchanges through a Member-bank. first time non-members were required to pay to the asso- ciation a definite sum in consideration of the privileges extended to them. Again, on December 21, 1896, the constitution was amended as follows : " Resolved, That the amendment to the constitution adopted October 14, 1890, assessing banks and others not members of this association, and clearing through 1 54 CLEARING-HOUSES members, two hundred dollars annually, be amended by increasing such amount to five hundred dollars annually, this amendment to take effect on and after January i, 1897." A resolution was also passed, to take effect on the same date, requiring all banks, not members of the asso- New York, 1900. Chairman Clearing-house Committee : Dear Sir : The of hereby applies for consent of the Clearing-house Committee to make the Exchanges for of on and after Statement of its condition enclosed. Respectfully, Approved Application to Clear for Another Bank. ciation, whose checks are exchanged at the clearing- house, to furnish the manager weekly statements of their condition, showing the average amount of their loans, discounts, and investments; specie, legal tender notes, and bank notes; deposit with clearing-house agent, de- posit with other New York City and Brooklyn banks and trust companies, net deposits, circulation. These state- THE NEW YORK CLEARING-HOUSE 155 ments were intended for the records of the clearing- house and not for publication; but a resolution was sub- sequently passed requiring that they be published, be- ginning with the first Saturday in November, 1897. Thus it will be seen by resolutions and amendments covering nearly the whole period of its history, the New York Clearing-house Association has been developing NEW YORK CLEARING-HOUSE, Nos. 77-83 Cedar Street. New York, 1900. Esq., Cashier. Dear Sir : Consent of the Clearing-house Committee is hereby given to the of to make the Exchanges at the New York Clearing-house for the of on and after subject to the rules and regulations of the Association. By order of Chairman Clearing-house Committee. Manager. Consent to Clear for Another Bank. the present system, regulating the conduct of those out- side institutions which enjoy the privileges of the clear- ing-house. No other association in the United States even approximates that of New York in the rigorous conditions it imposes upon non-member banks, and in the consequent safeguards it has thrown around its members. . . COPY OF STATEMENT . . OF THE for week ending the day of 189 , as required by Resolution of the Clearing-house Committee, of the New York Clearing-house Association, adopted December 28, 1896. Average Amount of Loans and Discounts and Invest- ments, Average Amount of Specie, Average Amount of Legal Tender Notes and Bank Notes, Average Amount on Deposit with Clearing-house Agent, *Average Amount on Deposit with other New York City Banks and Trust Companies, .... Average Amount of Deposits, Average Amount of Circulation, * This item should include amounts on deposit with Brooklyn Banks and Trust Companies. NEW YORK CLEARING-HOUSE. Please send a copy of the Weekly Statement of your Bank to the Clearing-house at the close of business on Friday of each week. WILLIAM SHERER, Manager. Form of Statement of Weekly Averages of Brooklyn Non-member Banks. THE NEW YORK CLEARING-HOUSE 157 The relationship of trust companies to the clearing- house, particularly in view of the number of trust com- panies organized and entering upon business the last few years, has been a subject for careful consideration upon the part of the management. A sub-committee of the clearing-house committee was appointed October 26, 1899, to inquire into the matter and make a report. The report of this sub-committee, the substance of which is given below, was adopted at a meeting held on the third of November, 1899. The report at the outset recites that the constitution of the association, particularly the amendment of Octo- ber 14, 1890, imposes upon the committee the responsi- bility of consenting to the clearings by banks and trust companies not members of the association. The report then continues that in the opinion of the sub-commit- tee, general and uniform rules from time to time should be adopted. Therefore the following are recom- mended : " No trust company shall be permitted to clear through any member or non-member of this association, unless such trust company shall have been in actual operation for at least one year at the time of making the application. " No trust company shall be cleared by any bank or trust company, member or non-member of this associa- tion, until it shall have been examined by the clearing- house committee, or some other committee of the asso- ciation duly appointed for such purpose. " Every trust company clearing through a member of this association, or which may hereafter be permitted to 1 58 CLEARING-HOUSES clear through such member, shall furnish a weekly state- ment of its condition to the, manager of this association, in the same manner as weekly statements of non-mem- ber banks clearing through this association are now ren- dered. Such statements shall include Capital, Net profits, Average amount of loans and discounts and investments, Average amount of specie, Average amount of legal tender notes and bank notes, Average amount on deposit with other New York City and Brooklyn banks and trust companies. Average amount of net deposits." In the notice sent out by the manager of the clearing- house, November 6, 1899, embodying the foregoing, it was asserted that the statements demanded of the trust companies were not for the present intended for publica- tion. The form of statement provided for use in this connection is given among the illustrations. At the meeting of the clearing-house committee above referred to, it was also resolved that from that date for- ward every statement of averages submitted to the clearing-house by a member or non-member should be verified and signed by an officer. Each bank belonging to the New York Clearing- house Association is required to furnish to the manager weekly, for publication, a statement of its condition, showing the average amount of loans and discounts, specie, legal tender notes, circulation, and deposits. The capital and net profits also are given, this being the only association which gives the latter item. COPY OF STATEMENT .for week ending the day of i as required by Resolution of the Clearing-house Committee of the New York Clearing-house Association, adopted November 3, 1899. Capital (as per latest statement of Banking Dept.), • . Surplus Fund and Undivided Profits (as per latest state- ment to Banking Dept.), Average Amount of Loans, Bills Purchased and Invest- ments (not Real Estate), Average Amount of Specie, Average Amount Legal Tender Notes and Bank Notes, Average Amount on Deposit with other New York City Banks and Trust Companies, Average Amount of Deposits, Correct _ NEW YORK CLEARING-HOUSE. Please send a copy of the Weekly Statement of your Company to the Clearing-house at the clOSC Of business on Friday of eacli weelc. WILLIAM SHERER, Manager. Form of Statement Required by the New York Clearing-house Association of Trust Companies. NATIONAL, 30.. Liabilities. Capital, ...... Net Profits, Circulation, . . . . . Due Banks and Trust Companies, . Due other Depositors, Unpaid Dividends, Total, Resources. Loans and Discounts, . . . U. S. Bonds on hand, . U. S. Bonds to secure circulation, U. S. Bonds to secure deposits, Other Stocks and Bonds and Mortg's, Premium on U. S. Bonds, Real Estate, Furniture, and Fixtures, Due from Banks, . . . . Cash Items and Bank Notes, Specie, ...... Legal Tenders, .... Over-drafts, . . . . . Total, Certified Checks, . . . . Exchanges, ..... Form Used at Clearing-house in Tabulating National Bank Statements. STATE. ^o Liabilities. 1 1 Capital, Net Profits, .... Due Banks, . . . Due Depositors, Unpaid Dividends, Total Resources. Loans and Discounts, . Stocks and Bonds and Mortgages, Real Estate, . . . Due from Banks, Cash Items, .... Specie, Legal Tenders and Bank Notes, . Over-drafts, .... Total, .... Exchanges for Clearing-house, 1 Expenses, Certified Checks, . Form Used at Clearing-house in Tabulating State Bank Statements. e I NO O '^ o >> n I- ^ 5» ■s ^ C/) o« ^ « a c^ 1^' M o T3 g o 1 i ^ -< C -< t4^ o ^ 4> s ^ 5 4> o. & o (L. 00 • 1 •c^ »• : : : ■w- : : ! * <» i • ^ I c/5 < < 1 1 >"■ B 3. s 6- 1. •5J si i 2.2 e< S§o •SON 1 ^ CC ')■<^^0 f> U| 4? I it S I 5 H 4 § in x> 1^ 1^1 Mi !^ rt rt ^ «-o -^ c « N 0> - q q t^ •1 tn On vovo 5 >n N 8M .^00 •c-cx <« K o c o c'C c « « rt ?? o. a a <<< U 03 1 ^ 0) o \ (0 (A 0) «) CO c ^ (8 (S (8 (8 (8 oc 2i 4) V u 2J C/5 ^ Q U Z < 02 UJ < O o . c/5 CJ) C/3 1 < I 1 o o j H ^ Z u < &5 ^ ^ «9 1^ o >^ > r^ ^ ^ 2 ^ ^ S 0^ UJ M^ ^ O o ii: ^ 1 '^ ■k c8 :: Q^ < ■k •M « % (A •♦i» ■k c s « S. 3 S 3 C i2 (0 o o 8. 0) 0) S) s c/) c (8 O <1) C8 c o c o a ! 0) 3 O C8 c (8 (8 leari alan J (0 J z o O tt O CQ COPY OF STATEMENT OF THE for week ending the day of 1 89 as required by Section 16 of the Constitution of the New York Clearing-house Association. Average amount of Loans and Discounts, Average amount of Specie, ... Average amount of Legal Tender Notes, Average amount of Deposits, .... Average amount of Circulation, Please send a copy of the Weekly Statement of your Bank to the Clearing-house de/ore 11 o'clock A.M. on each and every Saturday. WILLIAM SHERER, Manager. Form of Statement Required of Associated Banks. -J- E to ^ u o » S si li l| II IS IS 1 ■ ^ : ii II «c c e -"a "a S-" si is III II II 1-2 1 SS uCb c ■III i 8u ..... ....!§ : ; : • i : : i : : a •rt 03 H CO "3 w- 55 6 o en S-) fl ?' M 1 .2 ^ ■| ^S ea CO ■w- ^ ^( o S a> « i2 CO *♦- ed o o-s OS 1 II c -(^ •s S M ^ J Q p:^ ; *s ^ ^ ^ <0 » (^ -5 •s -^ 9" ^ o >- 6 . ; .f CO ; ', oa 13 > c ^^^! Cx3 Q. o -03 E-H O :. •4 O 1/1 c • S2 IS ^ z ^ .£3 S-gg § ^^'S •^"^S TS ^ J^ ? ^1 * Oi : : i^ i pq '3 a. U ^ fi <«- g (U S 2 : : • (/) >t'- 1 f- < : : . i ^ -1 c OS ^ < § s 8 m- Q I i Q ^ i ^ 2 s 4^ . . . c >.^ o o O C8 « O c4 CT3'^ C 8:^28 08 5 i" rt tfl : °-2« 8 C s l68 CLEARING-HOUSES The matter of collecting checks and other items out- side of the city of New York is a subject that for many years past has received most careful thought upon the part of the officers and members of the New York Clear- ing-house. An amendment to the constitution was adopted, March 13, 1899, directly bearing upon this point and embodying a policy that was so radical as not only to attract attention throughout the entire financial community, but at the outset to incite more or less oppo- sition. As time has passed, however, the justness of the provisions has become apparent and the business com- munity has acquiesced in what is manifestly an entirely reasonable measure. The amendment to the constitution, being an addition to Section 8, was as follows : " The clearing-house committee shall have power to establish rules and regulations regarding collections out- side of the city of New York, by members of the associa- tion or banks or trust companies or others clearing through such members, and the rates to be charged for such collections, and also providing for enforcement of the same. The committee may from time to time make any additions to, or changes in, such rules and regula- tions as it deems judicious. After any rule or regulation upon the subject has been once established, it shall not, however, be altered or rescinded until it has been in force at least three months, except by majority vote of the Clearing-house Association." Under this amendment the following rules and regula- tions regarding collections outside of the city of New York were adopted by the clearing-house committee : THE NEW YORK CLEARING-HOUSE 169 " Pursuant to authority conferred upon it by the con- stitution of the New York Clearing-house Association, the clearing-house committee of said association estab- lishes the following rules and regulations regarding col- lections outside of the city of New York, by members of the association, or banks, trust companies, or others clearing through such members, and the rates to be charged for such collections, and also regarding enforce- ment of the provisions hereof. " Section i. These rules and regulations shall apply to all members of the association, and to all banks, trust companies, or others clearing through such members. The parties to which the same so apply are hereinafter described as collecting banks. " Section 2. For items collected for the accounts of, or in dealings with the governments of the United States, the State of New York, or the city of New York, and for items payable in the cities of Boston, Mass. ; Providence, R. I.; Albany, N. Y.; Troy, N. Y.; Jersey City, N. J.; Bayonne, N. J.; Hoboken, N. J.; Newark, N. J.; Phila- delphia, Pa.; Baltimore, Md., the charge shall in all cases be discretionary with the collecting bank, and the same shall not be governed by the provisions of these rules and regulations. '' Section 3. For all items from whomsoever received (except on those points declared discretionary in Section 2), payable at points in Connecticut, Delaware, District of Columbia, Indiana, Illinois, Kentucky, Maine, Mary- land, Massachusetts, Michigan, Missouri, New Hamp- shire, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, and 1 70 CLEARING-HOUSES Wisconsin, the collecting banks shall charge not less than one-tenth of one per cent, of the amount of the items respectively. '' Section 4. For all items from whomsoever received payable at points in Alabama, Arizona, Arkansas, Cali- fornia, Colorado, Florida, Georgia, Idaho, Indian Terri- tory, Iowa, Kansas, Louisiana, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Mexico, North Caro- lina, North Dakota, Oklahoma, Oregon, South Carolina, South Dakota, Tennessee, Texas, Utah, Washington, Wyoming, and Canada, the collecting banks shall charge not less than one-quarter of one per cent, of the amount of the items respectively. " Section 5. In case the charge upon any item at the rates above specified does not equal ten cents, the col- lecting bank shall charge not less than that sum; but all items received from any one person at the same time and payable at the same place may be added together and treated as one item for the purpose of fixing the amount chargeable. " Section 6. The charges herein specified shall in all cases be collected at the time of deposit or not later than the tenth day of the following calendar month. No col- lecting bank shall, directly or indirectly, allow any abate- ment, rebate, or return for or on account of such charges or make in any form, whether of interest on balances or otherwise, any compensation therefor. " Section 7. Every collecting bank, trust company, or other corporation not a member of the association, but clearing through a member thereof, shall forthwith adopt by its board of directors a resolution in the following THE NEW YORK CLEARING-HOUSE 171 terms, and file a certified copy thereof with the associa- tion as evidence as therein specified : " Whereas, This corporation has acquired the privi- lege of clearing and making exchange of its checks through the New York Clearing-house Association, and is subject to its rules and regulations: Now, therefore, Be it Resolved that this corporation hereby in all respects assents to and agrees to be bound by and to comply with all rules and regulations regarding collections outside of the City of New York, which may be established pursu- ant to the Constitution of said Association, and that the President of this corporation is hereby instructed to file a certified copy of this resolution with the Clearing- house Association as evidence of such assent and agree- ment on the part of this corporation. " Section 8. In case any member of the association shall learn that these rules and regulations have been vio- lated by any of the collecting banks, it shall immediately report the facts to the chairman of the clearing-house committee, or, in his absence, to the manager of the asso- ciation. Upon receiving information from any source that there has been a violation of the same, said chair- man, or, in his absence, said manager, shall call a meeting of the committee. The committee shall investigate the facts and determine whether a formal hearing is neces- sary. In case the committee so concludes, it shall in- struct the manager to formulate charges and present them to the committee. A copy of the charges, together with written notice of the time and place fixed for hear- ing regarding the same, shall be served upon the collect- ing bank charged with such violation, which shall have 172 CLEARING-HOUSES the right at the hearing to introduce such relevant evi- dence and submit such argument as it may desire. The committee shall hear whatever relevant evidence may be offered by any person and whatever arguments may be submitted, and shall determine whether the charges are 1899. I hereby certify, that, at a meeting of the Board of Direc- tors of of held 1899, the following preamble and resolution were adopted : WhereaSy This corporation has acquired the privilege of clearing and making exchange of its checks through the New York Clearing-house Association, and is subject to its rules and regulations : Now, therefore. Be it Resolved that this corporation hereby in all respects assents to and agrees to be bound by and to comply with all rules and regulations regarding collections outside of the City of New York, which may be established pur- suant to the Constitution of said Association, and that the Presi- dent of this corporation is hereby instructed to file a certified copy of this resolution with the Clearing-house Association as evidence of such assent and agreement on the part of this cor- poration. [seal] Agreement to Comply with Rules and Regulations Regarding Collections Outside of New York. sustained. In case it reaches the conclusion that they are, the committee shall call a special meeting of the association and report thereto the facts with its conclu- sions. If the report of the committee is approved by the association, the collecting bank charged with such viola- tion shall pay to the association the sum of five thousand THE NEW YORK CLEARING-HOUSE 173 dollars, and in case of a second violation of these rules and regulations, any collecting bank may also in the dis- cretion of the association be excluded from using its privileges directly or indirectly, and, if it is a member, expelled from the association." By resolution of the clearing-house committee, the foregoing resolutions went into effect on the 3d day of April, 1899. Most complete and accurate records are kept at the New York Clearing-house of all the transactions, both of the exchanges between the banks and of all the im- portant acts relating to the administration. Six per- manent employees, subordinate to the manager and assistant manager, are required to perform these duties, the attention of the latter two being almost wholly occu- pied in work of an administrative character. There are about twenty-five records, consisting of ledgers, statements, books, and registers. The most important are as follows: A record book containing a copy of the manager's proof-sheet, showing the daily exchanges and balances of the several banks and the totals of the same; a ledger showing the exchanges and balances of each bank kept separately, the same being a compilation from the proof-sheet; a registry book show- ing the balances received at the clearing-house each day; a record of the kinds and amounts of money received in payments of balances by days, months, and years since 1882; a weekly statement record showing the weekly statements required from members for publication; the statements made in response to the call of the Comp- troller of the Currency and the State Superintendent of 174 CLEARING-HOUSES Banks, compiled and recorded for the use of members of the association; an individual weekly bank-statement introduced in 1892, being a compilation of the weekly statement by banks; a record of the increase and de- crease in the items called for in the weekly statements; an annual record of comparative statements of footings of weekly statements; a record for the quarter begun in 1892, showing the resources, liabilities, dividends, and sales and book value of stock; a record of information, as complete as possible, regarding all the banks in New York City; a record of the issue of clearing-house cer- tificates upon the deposit of gold, and also upon the de- posit of collateral security, with the loan committee when in session; a general statement of fines and correc- tions of clerks since 1877; a record of the returns, as far as possible, from the various clearing-houses of the United States. There are about ten other records of less importance, besides the usual ledger, journal, and cash-book, in which the clearing-house keeps its own accounts and the rec- ords of the proceedings of the various committees. CHAPTER XII DAILY ROUTINE OF THE NEW YORK CLEARING- HOUSE The Clearing- room— Clerks and Messengers — The Manager's Part — How the Exchanges are Made — The Cash Balance Paid In — The Disbursements — Clearing-house Gold Deposi- tory — Restrictive Indorsements — Pro Rating of Expenses — Record of Fines — Table of Annual Clearings — Table of Average Daily Balances. The clearing-room of the New York Clearing-house is a beautiful and commodious apartment, sixty feet square, surmounted by a dome rising twenty-five feet above the walls. Light enters through the glass form- ing the upper part of the dome, and, when necessary, additional illumination is secured by the use of electric lights, which encircle the base of the dome. Four rows of desks occupy the floor, with sufficient space between for an easy movement of the clerks in delivering the ex- changes. Each member has its own numbered desk, separated from the one on the right and left by net-work of wire. At the east end of the room is the manager's gallery, elevated sufficiently to command an easy view of the scene of operations. It is made accessible in front by steps and in the rear by an elevator. Each business day, at lo o'clock, the exchanges take 175 i;6 CLEARING-HOUSES place between the banks. About fifteen minutes before the hour designated the clerks begin to arrive. For- merly it was the custom for each member to send only two clerks, but so numerous and cumbersome have be- come the exchanges of many of the banks that it is now necessary to send one and sometimes two extra clerks to assist in transporting the items to and from tl^e clear- ing-house, and in delivering the packages. The two essential representatives of each bank are the " delivery clerk " and the " settling clerk." The former delivers the packages brought, and the latter receives the return packages from the messengers of the other banks. Each member sends its items for the other banks made out separately and enclosed in envelopes, with the amounts listed on the " exchange slip " attached to the exterior. On their arrival at the house the settling clerks furnish the proof clerk, sitting at his desk in the man- ager's gallery, with the " first ticket," upon which is entered the " amount brought " or " credit exchange," and which the latter transcribes on the clearing-house proof under the head of " Banks Cr." The total of the amounts thus brought by the several clerks constitutes the right-hand main column of that sheet. If each mes- senger has a package for each of the other banks, there are four thousand and thirty-two in all to be delivered. As a fact, in all other respects than the quantity of packages, this is the number of transactions between the clerks, for it is found in practice better to use a blank slip than to omit a slip, merely because there is no amount to put upon it. This plan saves doubt and unnecessary THE NEW YORK CLEARING-HOUSE 177 searching when looking after the proof. The stationery used by each of the several banks is put up in sets in numerical order, and this is a reason why it is easier to use all the slips than to discard those which happen to have no items. Accordingly, as the delivery clerks pass 2d Teller, No. 1. BANK OF NEW YORK NAT'L BANKING ASSOCIATION FROM No. 61. THE FOURTH NATIONAL BANK. 1900 Form of Exchange Slip. the desks, as is described farther on, it is the rule to de- posit the " small ticket " with the receiving clerk in each case, whether there is a package corresponding to it or not. When the settling clerks come to make their sum- ming up, first checking back by the small tickets, they O 22 o t« •s Oi ^ 4^ ^ 3 s x« ^ o s; «^ ? CD CO : 5: i »*i* ;^ g 1 y 1 € I ^ i i ! I t (£ i -^ cd OD 15 c ".«-• CO 2: f t: 3 rH U. CO ^ 6 'S S 6 ^ •!*•?* •fr *|* •!* *^ •^ "f^ *f* •^•f* *f* ^ THE NEW YORK CLEARING-HOUSE 179 find that the blank spaces in their sheets are justified by the blank tickets of corresponding numbers, and are in this respect assured of the correctness of their work. When the hand of the clock points to a few minutes before 10 the manager appears in his gallery, usually sur- rounded by a group of visitors. At one minute before 10 he sounds a gong as a signal for each of the clerks to station himself in his proper place. The settling clerks occupy their separate desks on the inside of the counter, No. 1. BANK OF NEW YORK NATIONAL BANKINa ASSOCIATION. From No. 61 Fourth National Bank. Fac-simile of "Small Ticket" Deposited by Messenger with Settling Clerk. while the delivery clerks form on the outside with their exchanges either on the left arm or carried in a box or case of some light material. The delivery clerks arrange themselves in the consecutive desk order, and stand ready for delivery as they pass along the counter. They carry " delivery clerks' receipts " containing the amounts for each bank arranged in order, upon which the several 1 80 CLEARING-HOUSES settling clerks, or their assistants, give receipts for the package delivered. All are now in position for the exchange. The man- ager calls " ready," and promptly at 10 o'clock he sounds the gong again and the delivery of the packages begins. He looks down upon four columns of young men moving simultaneously like a military company in step. At the start each advances to the desk in front where his first de- livery is to be made. He deposits the package of items and also the receipt slip on which the assistant of the set- tling clerk (or, in the case of small banks, the settling clerk himself) writes his initials opposite the amount of the package delivered in the blank space provided for that purpose. At the same time, in an opening in the desk provided for that purpose, he deposits a "small ticket " containing the amount of the package. If cor- rect, it must agree with the amount listed on the " ex- change slip." This process is repeated at the desk of all the banks, each clerk making the complete circuit in ten minutes to the point from which he started. Being now at liberty, each delivery clerk takes back to his bank the exchanges deposited by the other mes- sengers, while the settling clerks remain until the proof is made. The settling clerks, immediately upon the completion of the exchange of packages, sum up, as quickly as possi- ble, the amounts entered on their statements under the head of " Banks Dr." Upon ascertaining the total they make out a " second ticket," containing the credit and debit exchanges and the balance, and send the same to the " proof clerk," who transcribes the debit exchange u No. 61. THE FOURTH NATIONAL BANK. E)clibcrp Clerli'fi Eeceiptg, jgoo No. BANKS. Bank of N. Y. Nat'l Bk'g Assoc'n. Bank of the Manhattan CcHnpany. Merchants' National Bank Mechanics* National Bank Bank of America Phenix National Bank , National City Bank Chemical National Bank , Merchants' Exchange Nat'l Bank Gallatin National Bank DR. DR SIGNATURES. 82 83 84 85 87 88 90 91 92 93 94 Fifth National Bank 82 83 84 85 87 88 90 9» 92 93 94 Bank of the Metropolis. West Side Bank W#»cf«»m Nnfinnal Bank First National Bank, B'klyn N. Y, Produce Exchange Bank... . Astor National Bank 1 Form of Delivery Clerk's Receipts. No. 61. THE FOURTH NATIONAL BANK. S>cttlinff CUxk'n S>tatement, ipoo No. BANKS. Bank of N. Y. Nat'l Bk'g Assoc'n. Bank of the Manhattan Company. Merchants' National Bank Mechanics' National Bank Bank of America Phenix National Bank National City Bank Chemical National Bank Merchants' Exchange Nat'l Bank. Gallatin Naional Bank Fifth National Bank Bank of the Metropolis West Side Bank Seaboard National Bank Western National Bank , First National Bank, B'klyn , National Union Bank Liberty National Bank , N. Y. Produce Exchange Bank. . . . Bank of New Amsterdam Astor National Bank DEBIT. FOOTINGS. BALANCES DEBIT. CREDIT. 3 4 6 7 8 12 13 M 82 83 84 1 85 1 87 ' 88 90 91 92 93 94 Form of Settling Clerk's Statement. 1 84 CLEARING-HOUSES under the head of " Banks Dr." (the credit exchange having been already entered), and the balance on the credit or debit side, as the case may require. While this is being done the settling clerks are check- ing back from the small tickets to ascertain whether the amounts agree with the amounts listed on their state- ments from the exchange slips. By this time the proof clerk has footed the four columns on his sheet, namely, the debit and credit exchanges and the debit and credit balances. If the former two agree with the latter two the work is correct, and the result is announced by the manager, who calls ofif credits and debits. As he calls off these balances, which are named in thousands of dollars, the hundreds and fractional parts being omitted, the clerks list the amounts on a special slip provided for the purpose, and thereby secure a gen- eral report of the balances of the day to take back with them for the inspection of their several cashiers. By these reports the managers of the several banks are in- formed of those who have balances to be paid them by the clearing-house, and also of those who are to pay amounts into the clearing-house. The time elapsed since the manager sounded his gong for starting the work, up to the completion of the proof, is perhaps forty-five minutes, or possibly a little more. Three-quarters of an hour is the limit, before fines are in order, against those who have made the errors that prolong the work; but it is not often that it becomes necessary to impose fines. The record time is thirty- five minutes, although the dates when the proof has been reached in thirty-seven to forty minutes from the time S ^ OS o f «^ "o •a g CO d GQ o I— a C) •a a •6<9. pq o EH m EH p^ o a ^3 Itn P^tHTIHMTTTftTtMM 1 ? t t n ' « ■ . f t . » t M H T H H t t t M T t t T T p * « M M 1 1 p f 1 86 CLEARIl^G-HOUSES the delivery clerks started on their rounds are numerous. When a particularly good showing in this regard has been accomplished the announcement of the result by the manager is very likely to be greeted with applause. But suppose, as not infrequently happens, there is a discrepancy. The proof-sheet does not balance, which clearly indicates that there is an error in the work of one or more of the clerks. The manager immediately an- nounces the difference and the clerks proceed to search for it. Various methods are resorted to, according to the nature of the difference. Usually the manager calls for an exchange of sheets, to the right or to the left, for ex- amination of footings, and in cases of apparent error in entry the amounts are called back. This is the final method of revision, and if the additions are correct it must make the proof. Thus far no money has entered into the transaction. Checks, notes, drafts, and other items have passed through the exchanges, but as yet no occasion has arisen for the use of a single penny. Evidently, however, the clearing is not yet complete. Each member has in its possession paper drawn upon itself which the other mem- bers have credited on their books, and likewise each member has given in exchange to each of the other mem- bers the paper drawn upon them respectively and which it has credited upon its own books. But the possibility is very remote that the amounts of the items delivered by any member to the other banks will exactly balance the sum-total of the items received from them. Indeed, so slight is the chance of such an agreement, that in the o o Mro-«-vOt^00ONfO O N fO •♦ O M M M X OV 0\ o^ o* o* o o a. m 00 ID o X 6 z < -J U :::^ o 6 Q c c ^ z z ■s a i2 2 CQ S S PQ Oh 2i H S 6 Z 55 2 o ■♦ »o tN UNIVi-.RSTTY 1 88 CLEARING-HOUSES whole history of the association there has not been a single instance of this kind, although, as we shall see, the approach on one occasion was within one cent of an exact exchange. Hence, each day after the exchange the general proof will show a debit on the part of some banks and a corresponding credit on the part of others. To complete the clearings, therefore, it is necessary for the banks to settle these balances. Accordingly, before half-past i o'clock each debtor bank, in compliance with the requirement of the consti- tution, pays into the clearing-house the amount of its debit balance and obtains a receipt for the same, signed by the assistant manager. After half-past i o'clock the creditor banks receive at the clearing-house their respec- tive balances and give their receipt for the same in a book provided for that purpose; but in no case can a creditor bank receive its balance until all the debtor banks have paid in. With the exception of fractional amounts, balances are settled with legal tender notes, gold coin. United States and clearing-house gold certificates. All money is paid to the clearing-house in packages made up in amounts of one thousand dollars, two thousand dollars, three thou- sand dollars, four thousand dollars, five thousand dollars, ten thousand dollars, twenty thousand dollars, fifty thousand dollars, and one hundred thousand dollars, and sealed with five seals having the bank's name or symbol thereon, also the amount in figures and in words, the date, the kind of money, as " legal tenders," " treasury notes," " gold," etc., plainly written or printed on each package. No package of over five thousand dollars, ex- No. BANKS. Bank of N. Y. Nat'l Bk'g Assoc'n, Bank of the Manhattan Company, Merchants' National Bank, Mechanics' National Bank, Bank of America, Phenix National Bank, . . . National City Bank, .... First National Bank, B'klyn, . National Union Bank, . . . Liberty National Bank, . . . N. Y. Produce Exchange Bank, Bank of New Amsterdam, . . Astor National Bank, . . . Exchanges, Balances, . Dr. 1900 Cr. Form of Settling Clerk's Report to His Bank of Daily Balances. igo CLEARING-HOUSES cept the twenty-thousand-dollar packages, contains more than one hundred bills; the twenty-thousand-dollar pack- ages may contain two hundred one-hundred-dollar bills. Packages containing legal tender notes are made up in amounts of one thousand dollars, two thousand dollars, three thousand dollars, four thousand dollars, five thou- sand dollars, ten thousand dollars, and twenty thousand dollars each, and all notes of a smaller denomination than five hundred dollars are put up in packages of not over five thousand dollars each. Unless it is necessary to ob- tain change, packages are never broken at the clearing- house, but are paid out as received. By virtue of their convenience and safety, the clearing- house certificates, elsewhere referred to, are now used ex- tensively in the liquidation of balances. These are of two kinds — those issued upon the deposit of gold coin in the clearing-house vaults, and those issued upon the depositr of gold coin with the assistant treasurer of the United States. Such certificates are issued in denominations of five thousand dollars and ten thousand dollars, corre- sponding to the full par value of the gold deposited, and are made negotiable only among the associated banks by indorsement on the back. The holders of these certificates are the absolute own- ers of the gold represented by them, and are at liberty to redeem the same at any time during banking hours. It is entirely optional with the members to make such deposits or not. They act according to their pleasure; but any member holding such certificates and trans- ferring the same to any party not a member, is subject to a fine of one hundred dollars for each offence. 1 b O i : ^ o '^ Ob 'S^ >-H 5i « ~i ^ M - el 1 i 1 .2 A hJ U ! t3) " 'Q ^ 1 "5 W H ^ e S ^ 5 S i i •: ^ -1 g *^ < ^ >> iH S CO 5 ^o ^ !z 1 a)oL 1^0. Registered at the NEW YORK CLEARING-HOUSE, New York, 1898. Pay only to any Bank member of the Neiv York Clearing-house Association* ca Resolution Adopted October 2, i860. Any member of the Clearing-house Associa- tion who shall pay or deliver to any party, other than a member of the said Association, the certifi- cate of deposit of the Clearing-house Depository, shall be subject to a fine of $ioo (one hundred dollars). 194 CLEARING-HOUSES The Bank of America was originally constituted a common coin depository, to hold in special trust and to issue certificates in denominations of one thousand dollars, five thousand dollars, and ten thousand dollars upon the deposit of such gold coin as the other banks might place therein. The clearing-house has been its own depository since its removal to the new location. Sometimes, when gold coin is in demand or there is a stringency in the money market, the coin is withdrawn from the depository by presentation of these certificates in considerable amounts. At other times the coin is freely deposited. A careful record is kept at the clearing-house of the amounts of money and certificates used in the settlement of balances. Some idea of the relative proportion of the various kinds of money and certificates employed may be gained from the record for the year ending September 30, 1899. The debit balances paid in were as follows: U. S. gold coin $233,309,000.00 U. S. bearer gold certificates 3,386,000.00 U. S. order gold certificates 750,000.00 Clearing-house gold certificates 2,824,210,000.00 U. S. legal tender and change 24,316,370.53 Total $3,085,971,370.53 The course pursued by the manager in the event of failure on the part of any member to appear at the proper hour to pay the balance against it differs somewhat from that pursued in many other associations. Section 16 of the constitution provides that in such an emergency the THE NEW YORK CLEARING-HOUSE 195 " several banks exchanging at the clearing-house with the defaulting bank shall immediately furnish the man- ager the amount of that balance in proportion to their respective balances against that bank resulting from the exchanges of the day, and the manager shall make req- uisition accordingly, so that the general settlement may be accompHshed with as little delay as possible. The respective amounts so furnished the clearing-house on account of the defaulting bank will, of course, constitute claims on the part of the several responding banks against that bank." Thus it will be observed that they shall " immediately furnish the manager the amount of that balance in pro- portion to their respective balances " against the default- ing bank. Most clearing-houses in a similar exigency require that a defaulting member shall deliver to the manager all the checks received through the clearing- house on the day of default, and that the latter shall return the same to the members clearing them. Sim- ilarly, all the members receiving checks from the de- faulting member on that day are required to surrender the same to said defaulting member, after which the clearing of the day is readjusted and a new settlement made, the same as if no items had been sent through by or on the defaulting member. There have been cases, however, where the insolvency of a bank was known be- fore clearing hour, whereupon the clearing-house com- mittee has declined to allow it to clear. The association is in no way responsible for the bal- ances, except in so far as they are actually paid into the hands of the manager, and then its responsibility is 196 CLEARING-HOUSES Strictly limited to the faithful distribution by him among the creditor banks of the amounts which he has received. Should any losses occur while the balances are in his custody, the associated banks must bear the same in pro- portion to the other expenses. Any error in the ex- changes and claims arising from the return of checks, or from any other cause, are adjusted directly between the banks concerned. The association is free from responsibility for the con- tents of sealed bags or packages received at the clearing- house, and all reclamations for errors or deficiencies in the contents of said sealed bags or packages must be made by i o'clock on the following day by the receiving bank directly against the bank whose mark the sealed bag or package bears. " All checks, drafts, notes, or other items in the exchanges, returned as not good or missent, must be returned the same day directly to the bank from which they were received, and the said bank must immediately refund to the bank returning the same the amount which it had received through the clearing- house for the said checks, drafts, notes, or other items so returned to it in specie or legal tender notes. But checks, drafts, notes, or other items to be returned for informality of indorsement may, after being certified by the bank returning it, be returned through the exchanges the following morning, not exceeding five thousand dol- lars in amount to any one bank." An amendment to this section was made on June 4, 1884, providing that in case of the refusal or inability of any bank to refund promptly to the bank presenting items not good, the bank holding them may report the THE NEW YORK CLEARING-HOUSE 197 amount of the same to the manager, whose duty it shall be, with the approval of the clearing-house committee, to take from the settling sheet of both banks the amount of such items and readjust the clearing-house statement and declare the correct balance, in conformity with the change so made, provided such report is given to the manager before i o'clock of the same day. All checks and notes, drafts, and bills of exchange, when certified by the banks on the previous day, are proper clearing matter. Also for the convenience of members, various kinds of money orders, though not authorized by the association, are accepted through the exchanges. Clearing items with restricted indorse- ments is prohibited by a resolution adopted June 4, 1896, as follows : " Resolved, That on and after the first day of July, 1896, members of this association shall not send through the exchanges any checks, sight drafts, notes, bills of ex- change, or other items having thereon any qualified or restrictive indorsements, such as ' for collection ' or ' for account of,' unless all indorsements thereon are guaran- teed by the bank, member of the association, sending such checks, drafts, notes, bills of exchange, or other item. Any such items sent in violation of the above requirements shall be returned directly to the member from which they were received, and shall in all respects be subject to the regulations contained in Section 15 of the constitution of the New York Clearing-house Asso- ciation." In response to many inquiries as to what indorsements are considered restrictive or qualified under the above 198 CLEARING-HOUSES resolution, the clearing-house committee replied that though in its opinion the forms " For Deposit " and '' For Deposit to the Credit of " do not fall under the class of indorsements within the purview of the clearing- house resolution, they are to a certain extent considered restrictive when followed by other indorsers, and that in- asmuch as the clearing-houses of several other cities have decided not to accept the indorsements '' For Deposit " or '* For Deposit to the Credit of," and decline to pay any item with other than a plain indorsement thereon, mem- bers of the association should request their correspond- ents and depositors to use the following form : " Pay Bank or order," which, if used, would prevent delay and possible loss in the collection of checks and other items. The expenses of the association have not always been borne by the members in the same proportion. Section 22 of the constitution, as originally adopted June 6, 1854, is as follows : " The expenses of the clearing-house, not including the expense of printing for the several banks (which last-mentioned expense shall be apportioned equally), shall be borne and paid by the several banks belonging to the association, according to their respec- tive capitals, as follows: Banks having capitals of less than five hundred thousand dollars shall pay one hundred dollars each annually. Banks having capitals of less than one million dollars, and not less than five hundred thousand dollars, shall pay two hundred dollars each annually. Banks having capitals of one million dollars and over shall pay three hundred dollars each annually. And in the same proportion if more funds are necessary.'* THE NEW YORK CLEARING-HOUSE 199 In 1864 the constitution was referred to a committee of five members for amendment and revision. In due time they reported the changes they had made, and on Janu- ary 24, 1865, the constitution was adopted as amended. It appears that prior to that time the above section was in force, requiring that members be assessed for ex- penses in proportion to capital, but that the change es- sentially to the present plan was then introduced. Prior to 1890 no charge was made upon non-mem- bers clearing, but on October 14th of that year a reso- lution was passed, fixing an annual assessment of two hundred dollars upon each non-member. On Decem- ber 21, 1896, an amendment was made to this resolution, changing such assessment to five hundred dollars in- stead of two hundred dollars. Original members paid no admission fee. Since the revision of 1865 the printing expenses have been divided equally, and each bank has paid an annual assessment of two hundred dollars, and, in addition, its portion of any further sum necessary rated on the amount of exchanges which it has brought to the clear- ing-house during the preceding year. These proportions are made out from the records at the clearing-house, after deducting the fixed annual assessment upon non- members and members, any fees that may have accrued from the admission of members, and rents due the asso- ciation. There is another important feature entering into the element of expenses which must not be overlooked. In associations where the clearing-house is rented property, it is comparatively easy, in fixing upon newly elected 2CX) CLEARING-HOUSES members their proportionate share of the current ex- penses, to do justice to all concerned. But in New York the situation is unique. The association owns its own clearing-house, for erection of which a heavy draft was made upon the members. Clearly, therefore, banks sub- sequently joining should in some way render to the other members a just compensation for the privileges they acquire. Such compensation is duly provided for in the follow- ing plan: Preliminary to the erection of a clearing- house nine thousand shares were issued — eight thousand nine hundred and seventy-five in the name of the presi- dent of the Clearing-house Association and twenty-five in the names of the five directors of the Clearing-house Building Company, who held the same in trust. Certifi- cates to the value of the shares were then issued to the banks in proportion to their respective capitals and sur- plus, and they in turn advanced the money for the erec- tion of the clearing-house. Each bank advanced an amount of money equal to the face value of the certifi- cates it held. This was done under an agreement that it should receive a stipulated rate of interest on its certifi- cates, such interest to be raised by, assessments upon the members according to capital. These certificates are not transferrable so long as the holder is a member of the association, but if at any time it should cease to be a member the association is given the preference in their purchase. The fines collected are applied to the reduction of the expenses. The following table, showing the amounts of fines for each year from 1885 to 1899, will be of interest: THE NEW YORK CLEARING-HOUSE 201 1885 Amount of fines collected $1,015 1886 n ti 1,002 1887 it a 1,422 1888 n ii 1,398 1889 (( a 1,121 1890 it ii 1,046 I89I ii it 885 1892 a it 749 1893 a it 989 1894 a it 538 1895 a it 521 1896 ii it 535 1897 (( it 542 1898 it it 407 1899 (( it 562 The maximum for this period, one thousand four hun- dred and twenty-two dollars, which is also the maximum for the whole history of the clearing-house, was attained in 1887, and the minimum in 1898. The decHne has been nearly uniform since 1887. The gradual falling off from year to year has been due, in the main, to improve- ment in the discipline, and greater care and efficiency on the part of the clerks. The following gives the scale of fines in force at the clearing-house : Forty-five minutes from the hour of commencing — vis., 10 o'clock — will be allowed for a proof. For all errors remaining undiscovered at 11. 15 o'clock the fines will be doubled, and at 12 o'clock quadrupled. 202 CLEARING-HOUSES statement (i.e., in the amount brought), whether of foot- ing or entry, and all errors causing disagreement be- tween the credit entries, the check tickets, and the ex- change slips, each three dollars. 2. Errors in making the debit (i.e., amount received) entries, each two dollars. 3. Errors in the tickets reported to the clearing-house, causing disagreement between the balances and aggre- gate, each two dollars. 4. Errors in footing the amount received, one dollar. 5. Disorderly conduct of clerk or delivery clerk at the clearing-house or disregard of the manager's instruc- tions, each offence, two dollars. 6. Clerk or delivery clerk failing to attend punctually with statements and tickets complete, at the morning exchanges, each two dollars. 7. Debtor banks failing to appear to pay their bal- ances before 1.30 o'clock, three dollars. 8. Errors in delivery or receipt of exchanges, each one dollar. It remains in this connection to give a table of figures showing the clearings for each year, from the establish- ment of the clearing-house in 1853 to the present time; also the balances for the same period, with other impor- tant statistics: I CLEARINGS FOR 46 YEARS. Fitoal years ending Sept. 30 No. OF MEMBERS CLEABINOS FOB 7EAB 9 AV^BAQE SAIL? CLEABIMGS 1854 50 $5,750,455,987-06 $19,104,504.94 1855 48 5,362,912,098.38 17,412,052.27 1856. 50 6,906,213,328.47 22,278,107.51 1857 50 8,333,226,718.06 26,968,371.26 1858 46 4,756,664,386.09 15.393,735-88 1859 47 6,448,005,956.01 20,867,333.19 i860 50 7,231,143,056.69 23.401,757.47 1861 SO 5,915,742,758.05 19,269,520.38 1862 50 6,871,443,591.20 22,237,681.53 1863 50 14,867,597,848.60 48,428,657.49 1864 49 24,097,196,655.92 77,984,455.20 1865 55 26,032,384,341.89 84,796,040.20 1866 58 28,717,146,914.09 93.541,195-16 1867 58 28,675,159,472.20 93,101,167.11 1868 59 28,484,288,636.92 92,182,163.87 1869 59 37,407,028,986.55 121,451,302.81 1870 61 27,804,539.405-75 90,274.478.59 1871 62 29,300,986,682.21 95.133.073-64 1872 61 33,844,369.568.39 109,884,316.78 1873 59 35,461,052,825.70 115,885,793.58 1874 59 22,855,927,636.26 74,692,573.97 1875 59 25,061,237,902.09 81,899,470.26 1876 59 21,597,274,247.04 70,349,427.51 1877 58 23,289,243,701.09 76,358,176.06 1878 57 22,508,438,441.75 73.785.746.54 1879 59 25,178,770,690.50 182,015,539.70 1880 59 37,182,128,621.09 121,510,224.25 1881 61 48,565,818,212.31 159,232,190.86 1882 62 46,552,846,161.34 151,637.935-38 1883 64 40,293,165,257.65 132,543,306.76 1884 62 34,092,037,337.78 11,048,981.55 1885 64 25,250,791,439.90 82,789,480.38 1886 64 33,374.682,216.48 109,067,588.94 1887 65 34,872,848,785.90 114,337,209.13 1888 64 30,863,686,609.21 101,192,415.11 1889 64 34,796.465,528.87 114,839,820.23 1890 65 37,660,686,571.76 123,074,139.12 1 891 64 34.053,698,770.04 111,651,471-39 1892 65 36,279,905,235.59 118,561,781.82 1893 65 34,421,380,869.50 113,978,082.31 1894 66 24,230,145,367.70 79,704,425-55 1895 67 28,264,379,126.23 92,670,095.49 1896 66 29,350.804,883.87 96,232,442.24 1897 66 31.337.760,947-98 103,424,953.62 1898 65 39,853,413.947-74 131,529,418.97 1899 64 57.368,230,771.33 189,961,029.04 To tals. i >1. 231, 423.41 8,499.23 $87,415,590.26 Reproduction of a Table Issued by the New York Clearing-house. 204 • CLEARING-HOUSES One trillion two hundred and thirty-one billion four hundred and twenty-three million four hundred and eighteen thousand four hundred and ninety-nine dollars and twenty-three cents! It is difficult to comprehend the magnitude of such a sum. This is more than suffi- cient to run the whole machinery of our Government for two thousand years, and is one hundred and thirty- five times as much as all the gold and silver money in the world. If put up in eight-ounce duck bags in the form of silver dollars, it would require ten million two hundred and eleven thousand seven hundred and three cubic yards of space for storage; and to count it all in a single year, it would take twelve thousand men, counting at the rate of one hundred and seventy-five dollars a minute, day and night, without intermission. These figures distance the transactions of all the other clearing-houses of the United States combined, whether we consider the sum-total of the exchanges since the inauguration of our clearing system or the current trans- actions. It will be noted that the increase in clearings from year to year has not been uniform. The decrease was nearly fifty per cent, from 1857-58, due in a large meas- ure to the panic of 1857. Thence the increase was nor- mal until the outbreak of the Civil War, when business interests throughout the country received a severe blow, and the clearings declined till 1863, when there was a sudden turn, followed by an increase for the next three years. The requirements of the new system soon exposed a weakness in the management of eight banks, and in con- BALANCES PAID IB MOBEY FOR 16 YEARS • Piscal years eoding Sept. 30 No. OP UEMBEBS BALANCE FOE YEAB ATEBAQE DAILY BALANCE Balances to Clear'gs Per Cent. 1854 50 $297,411,493.69 $988,078.06 5'' 1855 48 289,694,137.14 940,565.38 ^540 1856 50 334,714,489.33 1,079,724.16 483 1857 50 365,313.901-69 1,182,245.64 439 1858 46 314,238,910.60 1,016,954.40 6«6 1859 47 363,984,682.56 1,177,943-96 564 i860 50 380,693,438.37 1,232,017.60 5"^'^ 1861 50 353.383,944-41 1,151,087.77 59, 1862 50 415.530.331-46 1,344,758.35 604 1863 50 ■677,626,482.61 2,207,252.39 455 1864 49 885,719,204.93 2,866,405.19 3" 1865 H 1,035,765,107.68 3.373,827.71 3" 1866 58 1,066,135,106.35 3,472,453.79 3'' 1867 58 1,144,963.451-15 3,717,413.80 309 1868 59 1,125,455,236.68 3,642,249.95 395 1869 59 1,120,318,307.87 3,637.397-10 299 1870 61 1,036,484,821.79 3,365,210.46 3" 1871 62 1,209,721,029.47 3,927,665.68 4'^ 1872 61 1,428,582,^07.53 4,638,255.54 422 1873 59 1,474,508,024.95 4,818,653.67 415 1874 59 1,286,753,176.12 4,205,075.73 569. 1875 59 1,408,608,776.68 4,603,296.65 56'i 1876 59 1,295,042,028.82 4,218,377.94 599 1877 58 1.373.996,301.68 4,504,90590 5^" 1878 57 1.307,843,857-24 4,273,999-53 581 1879 59 1,400,111,062.86 4,560,622.35 556 1880 59 1.516,538,631.29 4,956,008.60 407 - 1881 61 1,776,018,161.58 5,823,010.36 366 1882 62 1,595,000,245.27 5,195,440.54 3'' 'IP 64 1,568,983,196.15 5,161,128.93 389 1884 62 1,524,930,993.93 4,967,201.93 447 1885 64 1,295,355,251.89 4,247,069.39 5'^ 1886 64 1,519,565,385-22 4,965,899.95 455 1887 65 1,569,626,324.77 5,146,315.82 449 1888 64 1,570,198,527-78 5,148,191.89 508 1889 64 1.757.637,473-47 5,800,783.74 505 1890 65 1.753.040,145-23 5,728,889.36 4- 3^<5©©©©©©©©©C ^f^*^ '!''*©©©©©©©'!* '!!^'^^'^©©©© 212 CLEARING-HOUSES in the earlier clearings. Each clerk upon his arrival first deposits the items which he holds on the other banks, and then takes his position at the desk of his own bank. Promptly at 11.30 o'clock each clerk begins to Hst and add the items deposited for his bank. The balances are then adjusted by due-bills or checks, after which the clerks repair to their several banks. The method of settling balances at these two ex- changes dififers from that pursued in various other clear- ing-house associations. The Farmers' and Mechanics' National Bank receives in special trust such gold coin as any of the members voluntarily deposit with it for safe- keeping for clearing-house purposes. This deposit ranges at the present time from five million dollars to six million dollars. Against such deposits, certificates, in denominations of five thousand dollars and ten thou- sand dollars, are issued to the depositing banks, signed by the manager of the Clearing-house Association, or by his assistant, or by some other person designated by the association for the purpose, and countersigned by the Farmers' and Mechanics' National Bank. These certifi- cates are negotiable only among the associated banks, and are receivable by them in the payment of balances at the clearing-house for the morning exchange. The coin thus placed on deposit is the absolute property of such of the associated banks as are, for the time, the holders of the certificates, and is held by the depository subject to withdrawal on presentation of the properly indorsed cer- tificates at any time during banking hours. There is also a constitutional provision that the man- ager of the clearing-house shall receive the certificates Q H Q w O X 6 z 2 < U 6^ -Si H^ o ?" -o ^ J3 3 U S) ■os= 'snssi J3)jB Asp 31]) 3snoH-3u!JV3i3 sqi qSnojqi ssSuvqoxs sq) ui X|uo siqBXBd st pus 'uosjsd Suizuoqinv jsqious Xq psuSisjsjunoo puv 3UO Xq psu'ais uaqib poo3 Xiuo si inq-snQ siqx J3iqSB3 aaNDisuaxNnoo 214 CLEARING-HOUSES issued by the assistant treasurer of the United States for clearing-house purposes under any act of Congress, in settlement of balances due in the morning exchange. These certificates, it is provided, must be indorsed, " Pay to the order of a bank, member of the Clearing-house Association of the banks of Philadelphia." These cer- tificates are issued in denominations of five thousand dol- lars and ten thousand dollars, and on legal tender notes only. Both the gold certificates and the legal tender certificates are exclusively used in the payment of the balances at the morning exchange; but, as they are in denominations of five thousand dollars and ten thousand dollars, exclusively, some other medium must be em- ployed in the payment of balances and parts of balances under five thousand dollars at the morning exchange, and the total of each balance at the runners' exchange. This is done with clearing-house due-bills (see form on another page), issued by the debtor banks to the clearing- house manager, who deposits them in the Philadelphia National Bank, which, in turn, sends them through the exchanges against the debtor banks on the following day. These clearing-house due-bills can be used only on the day of issue, and are payable only in the exchanges through the clearing-house the day after issue. yjhe manager issues to creditor banks manager's checks on the Philadelphia National Bank for the amount of their credit, under five thousand dollars, being the amount of the due-bills deposited with that bank. Banks are required to give due-bills to the other banks upon demand, in payment of items at their counters, where the 'amount exceeds one hundred dollars. They are also re- CLEARING-HOUSE OF PHILADELPHIA 215 quired to furnish to each other, and to the manager of the clearing-house, the names and signatures of all per- sons authorized to sign or countersign due-bills. By this means the balances are settled from day to day without the use of a single penny of money. The risk WEEKLY STATEMENT Average Condition for the ) Week preceding Monday, S 190. Capital Stock Loans and Discounts Lawful Money Reserve Due from Other Banks Due to Other Banks Deposits Due by Due to .New York, $. .Cashier Form of Weekly Statement Required of Philadelphia Banks. attending the transfer through the streets of the city of large sums of money is obviated, and the greatest pos- sible ease is secured in the receipt and disbursement of balances. In 1 89 1, after the runners' exchange had been in opera- tion for some twenty-eight years, the question arose as 2 16 CLEARING-HOUSES to its abandonment, partly on the ground of economy. The proposition to consoHdate the two exchanges was brought up at one of the meetings of the association, but after considerable discussion it was laid on the table. The advantage to the banks of being able to ascertain before 3 o'clock whether the items received in the morn- ing mail are good outweighed other considerations, and accordingly the original plan was continued. The provision of the constitution regarding statements is as follows: Each bank shall furnish on Mondays, for publication, a statement of its average condition for the previous week, after deducting the daily exchanges from the gross figures of the preceding day. To each state- ment shall be appended the state of the account of the bank with New York on the day of report. These state- ments shall be certified by the president, cashier, or as- sistant cashier. Each bank is also required to furnish a daily statement to the manager, but not for publication, certified by the general book-keeper. Such statement is to be made before the commencement of business and sent to the clearing-house with the morning exchanges. Thus the Philadelphia Association is more rigid even than New York in this particular, and, indeed, more exacting than any other clearing-house association in the country. In many cases, especially in the larger cities of the country, a weekly statement is required, but in no city, except Philadelphia, is a statement required oftener than once a week. A comparison of the weekly statement of average condition of the Philadelphia banks with the Boston and CLEARING-HOUSE OF PHILADELPHIA 217 New York statements will reveal some interesting facts. A glance at the capital stock of the different banks in Philadelphia will show an average far below that of 20 J^f Daily Statement of THE r'HeST iT.A.TIOiT.AJL. B-AJfcT3C as agreed by the action of a Meeting of the Clearing House AsMciation, held January 8, 1872. Such Statement is to be made eotrf day before the com- mencement of busness, and sent with tht Exckanget, to the Clearing Home, at or before half-.pist Eight o'clock, A. M. Loans and Discounts, including all Interest Bearing securities of the United States. Individual Deposits, Banks' and Bankers' Deposits. • Total Deposits, Less Due from Banks and Bankers, exclusive of Reserve Agents, .... NetDeposits. .... Specie. U.S. Legal Tender Notes. . . - U. S. Ugal Tender Certificates, • - U. S. Treasury Gold Certificates, . Clearing House Gold Certificates, Cash Rrserve. Due by Reserve Agents, .... Total Reserve, - • CircuUtion, National Bank Notes. .... / certify that the above ttatement is eorrect the books of the Bank. by Form of Daily Statement Employed by the Banks of Philadelphia. New York or Boston. Of the thirty-three members, only three are capitalized at one million dollars each; two at one and a half million dollars, and one at two million 2l8 CLEARING-HOUSES AVERAGE CONDITION OF THE BANKS IN PHILADELPHIA, For the Week preceding Monday, October 16th, 1899, Aa fUmlahed by JOHN O. BOTD. HuAgw PhOMlalphU CImrtat Boom. BANKS. CAPITAL STOCK LOANS AND DISCOUNTS UwlylMoMy OM«r Bb. OMUBk.. DEPOSITS C««Ut.«, Na 1 PHn.AnFn.PHlA NATIONAL 11.500.000 315.788.000 15,855,000 «1,2«4.000 •5,794.000 114,029.000 •270.UO0 » NORTH AMERICA 1.000,000 7.4*0.000 3,001.000 927.000 I.ln7,000 7.881.000 89.000 S FARM'S A MECHB NATIONAL 2.0O0.00O 8.444.000 1.731,000 1,290,000 3.479.000 4.673.000 l.l»2.00<) 6 MECHANICS NATIONAL 500,000 :|.181.000 795,000 488,000 1.115.000 MI6.000 358,000 < NAT BR. OF V. UBERTIGB 500.000 3.540.000 789,000 221,000 317.000 3.0U2,«» 45,000 7 80UTHWARK NATIONAL 250.000 l.-.»5.000 293,000 65,000 88.000 1.153,000 45,000 « KENSINGTON NATIONAJL- 250.000 1,326,000 371.000 78.000 1,206,800 134.000 9 PENN NATIONAL, 500.000 3,880.000 1.022,000 247,000 487.000 3.;v8.ooo 45,000 10 WESTERN NATIONAL 400.000 •A817.000 842.000 281.000 rAOOO 2ja7.000 311.0011 II MANUFACTURERS NAPL 500.000 2,473.000 550,000 314^000 749.000 I.9O6.O0O 45.000 13 OIRARD NATIONAL 1.000.000 6.90!(.000 l,65(i.000 1.100,000 2,110.000 5.449.00O 45.00U U TKADE8MENS NATIONAL 500.000 3.787.000 1,218,000 862.000 •'..TM.WIO 2.772.000 45.0.10 I& CON60UDATION NATIONAL 300.000 1.873.000 331.000 190,000 243.000 1.ZBA000 270,000 400.000 600.000 942.000 4.695,000 45.000 45.000 18 CORN EXCHANGE NATIONAL... 7,321.000 2,362.000 1,188,000 8880,000 500.000 S.'JOS.OOO 921.000 815.000 1,135.000 209.000 20 FIRST NATIONAL 1,000,000 7.729,000 •2,5;4.-000 90O.O0U 3,6113,000 6,15»,000 45,00u 21 THIRD NATIONAL 600,000 3,752,000 1.066,000 320.000 678,000 3,780,000 44.000 23 SIXTH NATIONAL 150.000 921,000 304,000 84.000 944.000 83,000 24 BIGHTH NATIONAL 275.000 2.354.000 '«6I.O0O 158,000 2,000 2,342.000 43.0UO 26 CENTRAL NATIONAL 750,000 7.975.000 2,152.000 519,000 2.860.000 5.653.O0O 46,000 it NATIONAL SECURITY t50,000 1.778,000 441.000 157.000 1,850,000 89,000 2» CENTENNIAL NATIONAL 800.000 2.3O4.00O •18.000 203.000 268,000 2,493,000 90,000 30 MERCHANTS' NATIONAL 400,000 1.683.000 1,078.000 6,755.000 4,414,000 635.00U 32 INDEPENDENCE NATIONAL 600,000 4,224.000 1.191.000 462.000 1,582,000 3.5!l9,000 45.001. 33 NINTH NATIONAL 300,000 1.69ti.U00 508.000 325.000 16.000 I.929.O0O 91,000 34 TENTH NATIONAL.. 200,000 804.UO0 260,000 4^000 24,000 780.000 86,000 3« NORTHWESTERN NA'TIONAL.. SOCOOO I.85B.00V 539,000 88,000 19,000 2.024,000 69,000 37 SOUTHWESTERN NATIONAI 200,000 763.000 141,000 36,000 72-,<.00O 46,000 39 FOURTH STREET NATIONAL 1,500,000 IS.S54.000 5,958.000 918.000 12.016,000 10.665.000 678.000 40 MARKET STREET NATIONAL 5U0.00O 2.784.000 845,000 368,000 806,000 3,284.000 1 45,000 42 QUAKER CITY NATIONAL 1 500,000 •2.218,000 488,000 84,000 10.000 1.946.000 269.001. 43 NORTHERN NATIONAL 200.000 1.081.000 305,000 28,000 12,000 1.186,000 69.000 T«T.^ j »i»,«15,000 »14.'«,59U,000 841.973,000 814,566.000 652,921.000 tl 12,6411.000 (5,491.000 COMPARISONS DMfwne. IneraiML IneraMS, 62J87.0UU 6857.000 11.459,000 11.814.000 «l. 137.000 CLEARINGS AND BALANCES. OcL 9tb 610.148,677 79 •1.909,5'iT ttt - lOlb 17,032J09 3« 2.136,473 0» " llib 15,816.93103 I.TI0:44SW * 12Ui 15,534,723 68 l,)«Mw278 Tt ' I3ib. 18,661.358 OS MIS.SOI Tt - Uih. 14,I30,76» 48 S.II2438 68 686,339.753 27 611; A statement of the Average Condition of Philadelphia Banks. dollars, making a total of only six with a capital of one million dollars or more. The aggregate capital of the members is only about forty per cent, of that of the mem- CLEARING-HOUSE OF PHILADELPHIA 219 bers at Boston and thirty-three per cent, of the capital of the members at New York. In Philadelphia, as in New York, the various items are included under seven heads, but are not the same throughout. Both give " Capital Stock " and " Circula- tion and Deposits " in common. New York reports " Loans " and Philadelphia " Loans and Discounts." Philadelphia reports also '' Lawful Money Reserve," " Due from Banks," and " Due to Banks," which are not given in the New York reports. In addition to the protection afiforded each member by these statements, each bank, upon becoming a member, is required to deposit collateral with the clearing-house committee, as security for its daily settlements, in the following proportion to capital: Banks with capitals of eight hundred thousand dollars and over, ten per cent. Banks with capitals of five hundred thousand dollars and under eight hundred thousand dollars, fourteen per cent. ; but not to be required to deposit over eighty thousand dollars. Banks with capitals over two hundred and fifty thousand dollars and under five hundred thousand dol- lars, twenty per cent.; but not to be required to deposit over seventy thousand dollars. Banks with capitals of and under two hundred and fifty thousand dollars shall deposit not less than fifty thousand dollars. The rules of the association further provide that if, after any bank shall have become a member of the as- sociation, the clearing-house committee shall deem the collaterals deposited by such bank to be insui^cient se- curity for its daily transactions, the committee may from time to time require such bank to deposit additional col- 220 CLEARING-HOUSES lateral security therefor. The rules also contain the following : " It is understood by all banks making such deposits that they alone are responsible for any loss on their collaterals deposited, resulting from the failure to make demand and protest, or from any other neglect or omission." In case of default by any member, the clearing-house committee is instructed to apply their deposit of collateral '* to the payment of any balances due by such bank at the clearing-house or to the reimbursement pro rata of the several banks furnishing any such balance, and the sur- plus, if any, shall be held by the committee as collateral security for any indebtedness of such defaulting bank to the clearing-house committee or to the association or any of its members, and also as security for all costs, expenses, and counsel fees, paid by the clearing-house committee for the collection of the security representing the deposit, or which the committee may be compelled to pay by reason of holding the same." The clearing-house com- mittee is required to determine the times when exchanges or deliveries of collateral security shall be made. The constitution further provides that, " Bills receiv- able deposited as such security shall in no case be received at more than seventy-five per cent, of their face value, unless accompanied by collateral security of greater value, when, in the discretion of the committee, such bills may be received to an amount not exceeding their face value. It shall be the privilege of each bank to examine twice a year, or oftener, at its option, the securities in the custody of the clearing-house committee, deposited by it as collateral security, to compare the same with the re- CLEARING-HOUSE OF PHILADELPHIA ceipt given by the committee, and if found correct, to execute to the committee a certificate setting forth the different kinds and amounts thereof, and that the same are in the possession and custody of the committee at the date of such certificate. Such examination may be made by an ofBcer of such bank, or by a committee of directors duly appointed for the purpose." As in New York and Boston, the expense of printing is apportioned equally; but while other associations re- quire that each bank shall be assessed a stated sum and pay the remainder thereafter, in proportion to its ex- changes for a given period, the Philadelphia Association requires that all such expenses shall be borne by the sev- eral members, according to capital, as follows: Banks having capitals of less than five hundred thousand dollars shall pay one hundred dollars each annually. Banks hav- ing capitals of five hundred thousand dollars and less than one million dollars shall pay two hundred dollars each annually. Banks having capitals of one million dol- lars and upward shall pay three hundred dollars each an- nually, and in the same proportion if more funds become necessary. The expenses are much lower than at New York, Chicago, or Boston. The fines, amounting to three hundred dollars to four hundred dollars annually, have always been donated to the Bank Clerks' Beneficial Association. In the last four or five years the disorder fines have amounted to only three or four dollars. None of the fines is high comparatively. For no offence is it greater than one dollar, except for failure to be punctual in the payment of debtor balances, in which case it is two dollars for each offence. 222 CLEARING-HOUSES Banks may be admitted from time to time to member- ship in the association, but the requirements are more rigid than in any other city. AppHcations must be made to the clearing-house committee, and upon a favorable report by them to the association the applicant may be admitted by an affirmative vote of three-fourths of all the members, and by paying an admission fee of ten thousand dollars, and certifying assent to the Articles of Association. In no other city is the admission fee so high, and in only a few is more than a majority vote of the members necessary for admission. The power of suspension is lodged in the clearing- house committee, but no suspension can take place unless a majority of the committee are present and vote unani- mously in favor thereof. In the event of such action, it is the duty of the committee to call a meeting of the association immediately to take the matter into consid- eration. The administration of the clearing-house is vested in a president, secretary, manager, assistant manager, com- mittee of arbitration, and clearing-house committee. The latter committee, consisting of six bank officers, is elected annually and in it is vested almost absolute power. This committee appoints the manager and assistant man- ager, establishes rules to be observed at the clearing- house, subject to the approval of the association, and gen- erally supervises clearing-house affairs. It has charge of the funds belonging to the association, draws on each bank for its quota of expenses, and submits to the associ- tion detailed accounts of expenditures. It takes into its custody the collateral securities required to be deposited CLEARING-HOUSE OF PHILADELPHIA 223 by the banks. This committee has power to remove the manager or any of the assistants whenever in its opinion the interests of the association require it. The committee can examine the books and assets of any member of the association, whenever it shall deem it necessary. The committee of arbitration is also elected annually and is composed of six bank ofificers. Upon it devolves the duty of hearing and determining disputes between members of the association, when submitted to it by either party. The duties of this committee, however, are not very arduous, as the records show it has met only twice in twenty-one years. The president is elected annually by ballot and presides at all meetings of the association. He is ex-oiHcio mem- ber of each of the standing committees, and in his absence a president pro tempore is appointed. At the beginning of the organization it happened that the man who had been longest president of a bank was made president of the association. He was repeatedly re-elected, his final term expiring after ten years of ser- vice. The precedent of electing and re-electing to the presidency of the association the one who has been longest president of a bank has since been adhered to, so that in the history of the association there have been only three presidents, as follows: Joseph B. Mitchell, from 1858 to 1868, inclusive; Joseph Patterson, from 1869 to 1887, and James V. Watson, whose term of office dates from 1887. The secretary is elected at the annual meeting by ballot. It is his duty to keep correct minutes of the pro- 224 CLEARING-HOUSES ceedings of the association in a book provided for the purpose. The manager has immediate charge of all business at the clearing-house, and the clerks and messengers from the banks are under his direction. His decisions concern- ing details at the clearing-house are binding, until modi- fied by the clearing-house committee. It is his duty to impose and collect fines fixed by the association for the violation of rules at the exchanges. With the assistance of the clerks, he performs the duties connected with the operation of clearing, the adjustment and payment of balances, the keeping of records, the preparation of the weekly statements, and, in a word, all the details of clear- ing. His salary is fixed by the association and he is re- quired to give bond with sureties in the sum of twenty thousand dollars, subject to the approval of the clearing- house committee. In this connection it may be remarked that at Chicago a bond is required in the same amount, but at Boston and New York it is fixed at ten thousand dollars. Permanent clerks are also required to give bond in the sum of ten thousand dollars each, with approved se- curities. Such bonds must be examined by the clearing- house committee at least once each year. In the history of the Philadelphia Clearing-house, four of the member-banks have failed — namely, the Fourth National in 1874, the Spring Garden and the Keystone National in 1891, and the Chestnut Street National in 1897. The failure of the Keystone National Bank in- volved the receiver thereof and the seven members of the clearing-house committee in litigation. The facts con- CLEARING-HOUSE OF PHILADELPHIA 22$ nected with the case and the result of the trial are very interesting and important to all clearing-house associa- tions. The circumstances were briefly as follows: On March 20, 1891, the Keystone National Bank made its regular exchanges at the clearing-house, bringing items to the amount of seventy thousand and five dollars and forty-six cents, and receiving one hundred and seventeen thousand and thirty-five dollars and twenty- one cents. The debtor balance of this bank, therefore, was forty-seven thousand and twenty-nine dollars and seventy-five cents. The bank failed to pay its balance at 12 o'clock, in accordance with the rules, and it was not subsequently paid. In compliance with a previous agreement between the associated banks and the Key- stone National Bank, the manager was allowed to hold the exchanges received by the latter until the payment of the balance. Accordingly, he retained the packages in his possession, and, after 12 o'clock on the day of failure, notified the banks which had sent the ex- changes that they must make them good by the pay- ment into his hands of that amount of money. With this request they immediately complied and took away the packages. In addition to the debit balance of forty-seven thou- sand and twenty-nine dollars and seventy-five cents on the morning of failure, the Keystone National Bank owed forty-one thousand one hundred and ninety-seven dollars and thirty-six cents, for which it had issued clearing- house due-bills in payment of its balance on the preceding day, and which due-bills, according to the common rule, were payable in the exchanges on the following day, 226 CLEARING-HOUSES which in this case was the day of failure. Further, it owed three hundred and thirty-five thousand dollars on clearing-house loan certificates, issued to it by the asso- ciation on the deposit of collateral security in obedience to the terms of a special agreement entered into between said bank and the Clearing-house Association. Acting under the instructions of the clearing-house committee, the manager appropriated the sum of one hundred and seventeen thousand and thirty-five dollars and twenty- one cents, furnished him by the banks, to the payment of the obligations of the Keystone National to the asso- ciation as follows: In payment of the debit balance of the Keystone National Bank in that morning's ex- changes, forty-seven thousand and twenty-nine dollars and seventy-five cents; to make good the due-bills given by the bank for its debtor balance on the preceding day, including due-bills given to the several banks, forty-one thousand one hundred and ninety-seven dollars and thirty-six cents; and the remainder, amounting to twen- ty-eight thousand eight hundred and eight dollars and ten cents, to the cancellation of a part of the three hun- dred and thirty-five thousand dollars in clearing-house loan certificates issued to that bank. Upon a bill brought by the receiver of the defaulting bank against the seven members of the clearing-house committee, the Circuit Court rendered a decree for seventy thousand and five dollars and forty-six cents, with interest from March 20, 1891, against the defendants, on the ground that after the known insolvency of the named bank, they applied its funds in their hands or under their control to the payment of its debts to the Clearing-house CLEARING-HOUSE OF PHILADELPHIA 22/ Association and to members thereof, with a view of giv- ing them an unlawful preference over other creditors. The Circuit Court of Appeals, to whom the case was appealed by the clearing-house committee, reversed this decree, on the ground that a bona fide exchange of items had taken place between the Keystone National Bank and its clearing-house association before the bank ex- aminer had acted, and when the clearing-house associa- tion had no reason to suspect the impending failure. The transaction was in the regular course of business and with a view to continuing operation. The exchange was an accomplished fact, and the only thing remaining to be done was the payment by the Keystone National Bank of its debtor balance in the morning exchange. It failed to do this, and hence the action of the clearing-house manager in appropriating the money received from the various banks holding exchanges on the Keystone Na- tional Bank to the payment of the latter's obligations to the association was a justifiable procedure. The receiver of the Keystone National Bank finally appealed the case to the Supreme Court of the United States, and in March, 1897, a decision was rendered in favor of the clearing- house committee. CHAPTER XIV THE BOSTON CLEARING-HOUSE Formation and Early History — Period of the Civil War— Set- tlement of Balances — Borrowing and Loaning Balances- Clearing for Outside Banks. Only three years after the establishment of the New York Clearing-house a similar association was formed in Boston — namely, in 1856 — for the purpose, as specified in the constitution, of effecting a more perfect and satis- factory settlement of the daily exchanges of checks and other items, and of the balances resulting therefrom. The constitution was modelled very closely on that of New York, and, although important changes have since been wrought in both, Boston still remains more nearly on the New York model than does any other important associa- tion in the United States. This is so, for the most part, because the New York Clearing-house was the only one at that time in the United States; and hence to it alone could Boston look for a model. The history of the association has been both eventful and interesting. Prior to its establishment there was much opposition to it, on the ground that it was an " in- novation upon the established order of things and of doubtful expediency," but when the pressure in favor of its establishment became so great that opposition on the 228 / THE BOSTON CLEARING-HOUSE 229 part of a few was no longer of any avail and it became an established fact, its great practical utility was quickly demonstrated and the opposing banks soon came into it. In less than two years after its formation the panic of 1857 burst upon the country, and in that crisis its useful- ness was severely tested. In New York specie payments were suspended, whereupon the Boston banks imme- diately took action, and a committee was appointed to re- port to the association what course should be followed, in view of the action at New York. Upon the recom- mendation of that committee that Boston should follow the lead of New York, specie payments were suspended. It thus became necessary to provide some substitute for specie. Clearing-house loan certificates, based upon col- lateral as security, did not come into use until i860, and hence a different course was taken from that generally pursued by clearing-houses in similar emergencies since that time. The association voted to permit its members to use their own circulating notes in the settlement of balances to a limited amount, based upon the capital of each bank, in no case exceeding five per cent., except in the case of the Suffolk Bank, which was allowed ten per cent., it at the time being the redeeming agent for the note cir- culation of nearly all the New England banks. These bills thus received at the clearing-house were to be re- turned to the next day's settlement, and were to be at the joint risk of the banks in proportion to the amounts of their respective capitals; and the clearing-house commit- tee were authorized to demand at their discretion satis- factory collateral security for such bills. The banks using 230 CLEARING-HOUSES their notes at the clearing-house were required to pay one day's interest at a time. The association, on the day following that upon which this plan was adopted, having been addressed by a com- mittee representing the merchants of the city, who ex- pressed their desire for an expansion of the bank loans, voted that the amount of circulating notes that may be used in settlements at the clearing-house be doubled. At a subsequent meeting, in order to encourage the use of specie, it was voted that the manager keep an account of the specie paid in by each bank, and in subsequent settlements repay to such bank, when a creditor, specie, this reimbursement to be in the order of payment by the banks. A few weeks later the association voted that the amount for which the bills of the associated banks may be used in the liquidation of balances at the clearing-house, be reduced fifty per cent., and on December 14, 1857, just two months after suspension, a unanimous vote was cast in favor of the resumption of specie payments. It is probable that for a short time thereafter the use of bank- notes was continued, but within a week it was voted to discontinue altogether their further use at the clearing- house. From this time on, the exchanges took place with lit- tle interruption till the outbreak of the Civil War, when anxiety and distrust again seized upon the country. In the latter part of i860 it was voted to permit the banks to settle their balances at the clearing-house with their own circulating notes, to the extent of ten per cent, of their capital, it being voted at the same time that it was THE BOSTON CLEARING-HOUSE 231 the duty of the banks of Boston to maintain special pay- ments in that crisis. There was much disturbance in financial circles from that time forward, and on August 27, 1861, the association voted that any bank which had agreed to the arrangement entered into by the banks in New York, Boston, and Philadelphia, with regard to the national loan, could deposit with the clearing-house committee treasury notes of that loan and receive cer- tificates to an amount not exceeding ninety per cent, of the par value of such treasury notes. These certificates were to be known as loan certificates and were to be receivable at the clearing-house in the settlement of balances. These were the first certificates of the kind issued by the Boston association. Not long thereafter the New York Clearing-house again suspended specie payments and was followed al- most immediately by Boston, in a resolution declaring that they suspend specie payments, until such time as they could with safety resume their legitimate basis for circulation and deposit. That time did not, in the course of events, arrive until seventeen years had passed by. Afifairs drifted on from bad to worse until the panic of 1873, when the association again authorized the issue of clearing-house loan certificates, secured by collateral on substantially the same basis as the issue by the banks in New York. No further action of this kind was taken by the association until seventeen years later, when, in 1890, certificates were again issued, and these were fol- lowed by similar issues in 1893 and 1895. Such are the important features of the association's history. The Boston Clearing-house is located at a central point 232 CLEARING-HOUSES in Old State Street. Here, at lo o'clock, on the morn- ing of each business day, the representatives of thirty- nine banks, members of the association, meet and ex- change the items which they hold upon each other. The clearing-house is elongated in form, with a double row of desks running full length, so placed as to leave sufBcient space for the delivery clerks to pass around next the wall. The process of exchanging items is precisely the same as at New York, except that in Boston they have aban- doned the practice of receipting for exchanges as de- livered, on the ground that it is a useless expenditure of time. In the settlement of balances, Boston has a system peculiarly its own. The constitution declares that '' the debtor banks shall pay to the manager at the clearing- house the balances due from them respectively, either in coin or in such other currency as the laws of the associa- tion shall require, or in such certificates as shall be au- thorized by the Clearing-house Association, excepting sums less than one thousand dollars, which may be paid in bills of the debtor banks." Although coin is specified as acceptable in the payment of balances, it is tacitly agreed that no silver will be used, owing to its great bulk and consequent inconvenience. National bank- notes are not acceptable, nor are any other bills in de- nominations less than twenty dollars. No money is brought to the clearing-house under seal except gold, and, with the exception of gold, all money is counted before being receipted for. Formerly, all gold coin was removed from the banks and weighed at the clearing-house, but this practice has been discontinued. THE BOSTON CLEARING-HOUSE 233 In the event of an error in the amount of currency re- ceived by a creditor bank, recourse can be had upon the clearing-house, provided such error is discovered by the clerk before leaving the clearing-room ; but if, after leav- ing the clearing-house, he should return with a claim for an error or deficiency in the money received, no recourse upon the association would be possible, the claim in that case being adjusted between the paying and receiving bank. In case of an error or deficiency in the coin con- tained in bags, reclamations are made by the receiving banks directly against the banks whose marks they carry, the clearing-house being in no way responsible for the contents of such bags. The constitution specifies that such reclamations shall be made in reasonable time. Each debtor bank, at the hour for making its settle- ment at the clearing-house, sends a ticket with an item- ized statement of its balance, as shown in the illustrations. On the back of the receipt which the manager gives the bank for its balance is a similar blank, and upon this, after counting each balance as it is paid in, he itemizes it, and if he finds that his statement agrees with the one sent in by the bank, he makes out a receipt for the whole, being satisfied that his work is correct. He retains the orders received from creditor banks as his receipts for their balances. Not more than one-third of the total amount of the balances, perhaps, is settled by the method we have just described. Many years ago the custom sprang up at Boston of borrowing and loaning balances at the morn- ing exchanges, and the settlement of the same by orders on the clearing-house, and this has grown to be one of the 234 CLEARING-HOUSES most important features of their clearing system. It had its inception in a small way some thirty years since, as a matter of convenience to debtor banks, and is quite unlike Boston, BALANCE PAID CLEARIHG-HOUSE THIS DAT BY NATIONAL BANK OF REPUBLIC. Be sure and itcmixe your balance. Have bills properly strapped and distinctly marked. Change Bills . Legal Tenders .... Clearing-house Qold Ctfis. Coin Gold Certificates . . . Orders Amount Form of Ticket Used by Boston Banks for Notifying Clearing-house Manager of Amounts Paid in Making Settlements. anything else in the clearing-houses of the United States. Before its adoption, debtor banks which found their bal- ances at the morning exchanges too great for convenient settlement with cash, but which could easily call in the THE BOSTON CLEARING-HOUSE 235 necessary amount later in the day, were accustomed to send their representatives through the streets to borrow from neighboring banks. Owing to the inconvenience and risk of this practice, the presidents and cashiers of the banks began to meet at the clearing-house, and then, after the exchanges had taken place, to borrow and loan their balances. The custom found favor with the banks and has gradually grown to such considerable propor- tions that some sixty per cent, of the total balances are now settled in this way. On the floor of the clearing- house at each morning exchange may be seen a busy group of bank officials, some borrowing balances, others negotiating loans. A may find himself a heavy debtor and may desire to borrow of B, whose balance is a heavy credit. If B wishes to loan to A, he gives him an order on the clearing-house, and the latter uses it the same day in the settlement of his balance. All orders, therefore, on the clearing-house are accepted by the manager in the settlement of balances to the full extent of their face value. But A may not desire but a small part of B's balance, in which event B may find a dozen other banks anxious to borrow, to each of whom he may loan a portion. Again, some, not finding it advantageous either to borrow or loan, settle their bal- ances by the usual cash payments at the clearing-house. In practice, some banks habitually loan, but never borrow. Others habitually borrow, but seldom or never loan. Although no direct losses have ever occurred from this practice, it is strenuously opposed by conservative bank- ers on the ground that it is dangerous for banks to bor- row so heavily when they may be called upon for the full 2'36 ■ CLEARING-HOUSES amount of the loan without a moment's warning. For example, A loans B seventy-live thousand dollars to-day, and the latter uses it in the settlement of his balance. B does not find it convenient to return the loan to-morrow, and A, finding an opportunity a day or two later for a better investment, sends through the clearing-house a check on B for the full amount. The latter is left with no alternative but to pay the balance or fail. Any objection, therefore, to such a custom seems on its face plausible, but, in practice, as is claimed, a severe check is placed upon the borrower by the discretion of the loaner. It is practically impossible for any member to be an habitual borrower without its being known to the other members. Thus creditor banks are enabled to exercise proper care in making loans, and thereby to avoid loss. The rate of interest on such loans corresponds very closely with the rate on call loans. The newspapers regularly report the clearing-house rate, and this doubt- less has some influence on the rate in the market. A prominent banker has said that the effect of this custom is to make the rate higher than it otherwise would be, as the banks needing the money must have it, no matter what the rate may be, but in a weak market it has the efifect of making the rate lower, since banks having a surplus will accept a low rate rather than hold cash over. One important disadvantage of this plan of borrowing and loaning balances, and one which has come into prom- inent notice in certain instances of late, should be men- tioned in this connection. A bank that is a borrower of clearing-house balances is thereby deprived of the assist- ance in time of distress afforded by clearing-house loan A THE BOSTON CLEARING-HOUSE 237 certificates. As before mentioned, the members of the clearing-house who are lenders of balances are very sure to know of a given bank that is an habitual borrower, and accordingly they are on their guard, watching for the op- portunity to call for the amounts they have loaned when- ever it would seem that the debtor bank could pay the same. As soon, therefore, as the debtor bank arranges for clearing-house loan certificates, its fellow-members, who are its creditors, hold out their hands for them, thereby exchanging unsecured claims against the bank for the very best security that it can put up. The debtor bank then is deprived of the advantage of clearing-house loan certificates up to the amount of its indebtedness to its fellow-members. To put it otherwise, the act of borrowing balances in the clearing-house anticipates the help that otherwise the clearing-house could and would be to the bank when it really needed assistance. It is, of course, impossible to eat the cake and have it too. During the time this custom has prevailed in Boston, many banks, first and last, have found themselves embarrassed thereby, and have been compelled to struggle along in seasons of stringency with- out the help that clearing-house loan certificates would have afforded them, simply because to have asked for them would have advertised their condition in a manner to bring one class of their creditors down upon them in a way to nullify all the assistance they had obtained, and perhaps also draw the attention of the business public to the embarrassed condition, after they had exchanged their good bills receivable for clearing-house loan cer- tificates. 238 CLEARING-HOUSES The plan of borrowing and lending balances, although very generally acquiesced in by the banks of Boston, would seem to be fraught with danger. It would be less alarming, in the estimation of many conservative bankers, if the creditor banks were obliged by clearing-house rules to report from day to day to what institutions they have loaned their balances, either in whole or in part. Trans- actions of this kind, it would seem, ought to be noted in the clearing-house records. A special committee has in charge the deposits of gold coin of member-banks of the Boston Clearing-house as a special trust fund, against which negotiable certificates are issued. This fund amounts at present to some ten million dollars, and certificates to the same amount have been issued against it. On obtaining the written assent of the clearing-house committee, members of the association are allowed to clear for outside banks and trust companies; but any bank, member of the association, making such exchanges, is liable therefor, and in the same manner as for its own exchanges and until at least one day's notice in writing is given to the clearing-house committee. Accordingly, in Boston and vicinity, and within a radius of ten miles from State Street, are no less than nineteen national banks and eighteen trust companies making their exchanges through members of the association, upon such terms of security as are agreed upon between them and the clear- ing members. Full responsibility for their acts is placed upon the members through which they clear. No statements whatsoever are required by the asso- ciation from such outside institutions, it being left wholly THE BOSTON CLEARING-HOUSE 239 to the members to determine their condition. Members, however, are required to furnish the manager weekly statements of condition. An example of the form em- ployed is given among the illustrations. A statement is also submitted of the condition of the associated banks of WEEKLY STATEMENT Average Condition for the } Week preceding Monday, ' 190. Capital Stock Loans and Discounts Lawful Money Reserve Due from Other Banks Due to Other Banks Deposits Due by $. New York, $. Due to .Cashier Form of Weekly Statement Employed by the Boston Banks. Boston, as returned to the clearing-house for a given week. A comparison of this statement with that required from the members at New York will show some interest- ing features, as well as some marked differences in many important details. The Boston banks are capitalized, on u: f 1 2^ <: ^ ^ 1 1 ^ u (1) 1 1 2 I 1 B CO i CO S :^ i^ Si c 1 I u ^g 3 1 4-> ei i >> if ^H ^ 9g 3 i § ^ 2 •i t/) XS a *?=; 2 bfi o ? CO . i i l: i^ o rom tl t the T 1 o == }_ 5 ^ D S 1 § G 1 •^ 2 1 CO , 1 C3 •-. O ® o C i 2 -S UJ .B tj ■ U 1 -3 o o e -^ . ' THE BOSTON CLEARING-HOUSE 241 the average, higher than those in New York, although recent changes in New York have caused certain banks to take unusual rank in this regard. In the former city o b o w a O iCQ O o w :2:sE?!S8S8S5assss;5;s55Ssssss:s iJJJJJJJjJJJJJJJJJJJJJJJJJJJJ.illll|i.l.i| iiiiiiiiiiiiiiiiiiiiiliiliiiiiiil.iii.iii sis§S8iil8sli?3§S.?siaS«i22?§l2BBi.2i.?all iliiiiiiiiiiiliilliiiiililiiiiiliiiliii ||||l|ijj.i.ilij.ij.lj.iijj.fli.ij.i.i.ii.ii.i.i.iiii litiiiiiiiiiiiiiiliiiiiliiiiiiiiiiiiiii S s s 5 5 S I is'is'ip'ilSs 1 3I ?'i I s 5'iSlj'S II ii 2 r I S B iiiiiiiiiiiiiiiiiiiiiiiifiiiiiiiiiiiiii iiiiiiiiiiiiiiiiiliiiliiiiiiiiiiiiiiiil iiiiiiiiiiiiiiiiiiiiliiiiiiiiiiiiiiiiii lllllllllllllllllllllllllllllllllllllll i|i|psp'|p;|i:§l§l§^^ :S2S5aSSS8asgSSKS = 55$555SsS!aSS i|l I * i gas = - 'it I'' 2 i I 8 I • " " s? ^ IS; sos i =:- i. i^'i lis 1 1 1 i J' II ^ I |H ? i s 11 i 2 E ll I Jill (g fourteen are capitalized at one million dollars; five at one million five hundred thousand dollars; one at one mill- ion six hundred thousand dollars; one at two million dol- 242 CLEARING-HOUSES lars; and two at three million dollars, making a total of twenty-three, or nearly sixty per cent, of all, with a cap- ital of one million dollars or more. It will be noted, further, that there is a wide difference in the items included in the two statements. At Boston they are given under eleven heads, and at New York under seven. .The only ones in the New York statement not included in the same at Boston are " Profits " and " Bills Payable." " Deposits," as reported at New York, is given in Boston under the two heads of " Individual Deposits " and " Due to Other Banks." '' Bills Pay- able," which formerly appeared in the Boston statement, has been omitted for some two or three years past. The requirement of the items, " Due from Reserve Agents," *' Exchanges for Clearing-house," " Due from Banks other than Reserve Agents," and " Five Per Cent. Fund," is not made by the New York Association. In addition to the protection furnished by these state- ments, the clearing-house committee is empowered to ex- amine any bank belonging to the association, and to re- quire from said bank securities of such an amount and character as the committee may deem sufificient for the protection of the balances at the clearing-house, when- ever it shall be in their opinion for the best interests of the association. Thus a member may be found to be weak and in danger of failure. If it is unable to pay its balance at the clearing-house, these securities will be appropriated for that purpose. The expense of printing is borne equally by the mem- bers; and all other expenses are defrayed by an annual assessment of one hundred and twenty-five dollars upon THE BOSTON CLEARING-HOUSE 243 each member, and the remainder after that amount pro rata the average daily amount which each bank has sent to the clearing-house during the preceding year. Upon each non-member clearing through the association an assessment is made, in accordance with a constitutional provision, as follows: Five hundred dollars per annum on institutions whose capital is five hundred thousand dollars or less, and one thousand dollars per annum on all whose capital exceeds five hundred thousand dollars. Admissions to membership may be made from time to time according to the following rule : " New members may be admitted to the association on the recommenda- tion of the clearing-house committee, either by the writ- ten assent of three-fourths of all the members filed with the manager of the association, or by vote of three- fourths of all the members of the association at a meet- ing called for the purpose, such new member paying an admission fee of three hundred and fifty dollars, and as- senting and subscribing to these articles." No require- ment, therefore, is made regarding minimum capital. For cause deemed suflficient, any member may be ex- pelled from the association by a majority vote of all the associated banks. The constitution declares that before withdrawal a member must pay its due proportion of all expenses for the current year and give three months' notice in waiting of such intention to the secretary. In practice, however, if a member desiring to with- draw pays its expenses, in compliance with the above re- quirement, and there is no objection on the part of the association, it may withdraw in less than the specified time, as was true of the Hancock Bank, which withdrew 244 CLEARING-HOUSES on thirty days' notice. The power of suspension is lodged with the clearing-house committee, but the vote of said committee must be unanimous in favor of such suspen- sion and must forthwith call a meeting of the associa- tion to take the matter into consideration. As shown before, the Clearing-house Association at New York was the only one in America when the bank- ers at Boston founded their clearing-house. In nearly all the details of method and administration, the rules established at New York were taken as a basis. As time went by, a few changes were found necessary, particularly in reference to administration, and hence it is un- necessary here to deal elaborately with this phase of the subject. The usual meetings of the association are held once each year and at such other times as the clearing-house committee may designate on their own responsibility or when requested to do so by any five of the associated banks. Owing to the difficulty of obtaining a quorum, the required number was fixed at one-third instead of one-half of all the members, as in most associations. At each annual meeting a chairman and a secretary are chosen by ballot, to hold office for one year or until their successors are chosen. At the same -meeting a nominat- ing committee of three persons is selected, whose duty it is to present to each bank belonging to the association list of nominees for officers for the succeeding year, such] list to be presented at least two weeks before the meetin| next after their election. A standing committee of five bank presidents or other directors of banks, members of the association, to be called the " clearing-house com- it THE BOSTON CLEARING-HOUSE 245 mittee," is elected annually, to serve for one year, and to their care most of the important interests of the associa- tion are intrusted, as at New York and elsewhere. They appoint the manager, whose salary is fixed by the asso- ciation, and who is required to give bond in the sum of ten thousand dollars, such bonds to be approved by the clearing-house committee. The duties of the manager consist in supervising the exchanges between the banks, and the settlements of balances. He is in immediate con- trol of all the business transactions of the clearing-house, discharging all the duties usually incumbent upon such officers. In another chapter is given an account of the Foreign Department of the Boston Clearing-house, being the outgrowth of an experiment which was commenced in June, 1899. CHAPTER XV FOREIGN DEPARTMENT OF THE BOSTON CLEARING- HOUSE Organization and History — Regulations— Two Clearing Hours — Blanks and Forms — Fines — Book-keeping. The Boston Clearing-house Association has had in operation for several months past a plan of making collections in the territory naturally tributary to that city, but outside of the city itself. It is known as the *' Foreign Department of the Clearing-house Associa- tion," and is conducted independently of the regular clearings of that organization. The question of collecting out-of-the-city checks had been discussed by members of the Boston Clearing-house Association for a long time, and finally, early in the year 1899, a special committee was appointed, to which the whole subject of collecting checks throughout the dis- trict known as New England was referred. This com- mittee, after careful deliberation, reported that in its judgment it was advisable and practicable for the clear- ing-house to undertake the collection of such checks and to distribute the proceeds thereof. The committee ad- vised beginning with the State of Massachusetts, and adding the other New England States one by one, as soon as proper provision for the same could be made. The report of the committee further recommended that 246 THE BOSTON CLEARING-HOUSE 247 the work be done at the clearing-house by the manager, under the supervision of the clearing-house committee. It nominated the following routine : Those banks which choose to avail themselves of this method of collecting their checks shall deposit them at some fixed hour, say at I o'clock, of each day. The checks are then to be as- sorted and the checks on each out-of-town bank made up in a separate package. To this package a slip shall be attached, bearing a list of the checks, and, further, a com- plete list is to accompany the checks, showing the total of the amount on each bank respectively. The clearing- house employees assigned to that duty shall send the checks forward to the banks on which they are drawn, so far as such banks will undertake to remit for checks on themselves by drafts on their Boston or New York correspondents. It was further suggested that in some cases checks on all the banks in one town or city might be collected through a single bank. The checks were to be sent by mail or by express, as found desirable. The report further set forth that the manager of the clearing-house should have a desk and number assigned to him, and should take part in the morning settlements, collecting through such settlements the various checks on Boston banks received by him, and paying in the same way to the Boston banks their respective proportions of the checks forwarded two days previously, as might be arranged. Each day's settlements by the manager, the report continued, should represent the amount of foreign checks received on a certain previous day, and the debits and credits should be equal in amount. In case, however, remittances should be delayed so that the manager was 248 CLEARING-HOUSES without suflicient funds to meet the charges against him, he would charge against the several banks, through the morning settlements, their respective amounts of such delayed remittances, or settle with the banks in their respective proportions of such delayed remittances in the payment of balances by the debtor banks and the distribution of balances to the creditor banks. The report was accompanied by various forms which were subsequently adopted for use. This report was approved, and at a meeting held December 18, 1899, the following amendment to the constitution, which had been recommended by the clearing-house committee, was adopted : ** The Clearing-house Association shall have the power to establish rules and regulations regarding collections by members of the association, or banks, or trust companies, or others clearing through such members, and the rates to be charged for such collections, and also to provide for the enforcement of the same. The association may from time to time make any additions to or changes in such rules and regulations as it deems judicious. Any rule or regulation upon the subject can be established only by a vote of the majority qf all the members of the association, and when once established it shall not be altered until it has been in force at least three months, and then only by a majority vote of all the members of the association." Under this provision rules and regulations were adopted at a meeting held December 27th, as follows : " Section i. These rules and regulations shall apply to all members of the association, and to all banks or trust companies or others clearing through such members. THE BOSTON CLEARING-HOUSE 249 The parties to which the same so apply are hereinafter described as collecting banks. " Section 2. For all checks and drafts from whomso- ever received, drawn upon any New England bank or trust company or banking house or other banking insti- tution, which does not pay checks and drafts drawn upon itself and sent through the Boston Clearing-house by remitting therefor on receipt thereof promptly at par, checks upon some member of the Boston or New York Clearing-house, or upon a banking institution clearing through some such member, the collecting banks shall, charge not less than one-tenth of one per cent, of the amount of such checks and drafts respectively. " Section 3. In case the charge upon any check or draft at the rate above specified does not equal ten cents, the collecting bank shall charge not less than that sum; but all checks and drafts received from any one depositor or correspondent on the same day, and payable by the same institution, may be added together and treated as one item for the purpose of fixing the amount to be charged. " Section 4. The charges herein specified are in all cases to be collected at the time of deposit or not later than the tenth day of the following calendar month. No collecting bank shall directly or indirectly allow any abatement, rebate, or return, for or on account of such charges, or make in any form any compensation therefor. " Section 5. In case any member of the association shall learn that these rules and regulations have been violated by any of the collecting banks, it shall imme- 250 CLEARING-HOUSES diately report the facts to the chairman of the clearing- house committee, or, in his absence, to the manager of the clearing-house. Upon receiving information from any source that there has been a violation of the same, said chairman, or, in his absence, said manager shall call a meeting of the committee. The committee shall investi- gate the facts and determine v^hether a formal hearing is necessary. In case the committee so concludes, it shall instruct the manager to formulate charges and present them to the committee. A copy of the charges, together with written notice of the time and place fixed for hearing regarding the same, shall be served upon the collecting bank charged with such violation, which shall have the right at any hearing to introduce such relevant evidence and submit such argument as it may desire. The commit- tee shall hear whatever relevant evidence may be offered by any person and whatever arguments may be submit- ted, and shall determine whether the charges are sus- tained. In case it reaches the conclusion that they are, the committee shall call a special meeting of the association and report thereto the facts with its conclusions. If the report of the committee is approved by the association, the collecting bank charged with such violation shall pay to the association the sum of one thousand dollars; and in case of a second violation of these rules and regula- tions, any collecting bank may also, in the discretion of the association, be excluded from using its privileges directly or indirectly, and, if it is a member, expelled from the association. '* Section 6. Every collecting bank, as defined in Section i of these rules and regulations, shall forthwith THE BOSTON CLEARING-HOUSE 251 adopt, by its board of directors, a resolution in the fol- lowing terms, and file a certified copy thereof with the association as evidence as therein specified : " Whereas, This corporation has acquired the privilege of clearing and making exchange of its checks through the Boston Clearing-house Association, and is subject to its rules and regulations, now, therefore, " Be it Resolved, That this corporation hereby in all re- spects assents to and agrees to be bound by and to com- ply with all rules and regulations regarding collections outside of the city of Boston which may be established pursuant to the constitution of said association, and that the president of this corporation is hereby instructed to file a certified copy of this resolution with the Clearing- house Association as evidence of such assent and agree- ment on the part of this corporation." It was provided that the above should go into effect on January i, 1900. In putting the plan into operation, the manager of the clearing-house prepared two lists of banks, one comprising those banks the location of which, with respect to the closing of mails, etc., required that checks should be deposited with the manager not later than I o'clock, and the other permitting the deposit of checks not later than 3 o'clock of each business day, in order to be got into the mail of the same day. This resulted in what is in effect two clearing hours for the foreign department. Saturdays are exceptions to the general rule, and with respect to that day it is pro- vided that all checks shall be deposited not later than I o'clock. The regulations for the collection of out-of-town 252 CLEARING-HOUSES checks, formulated by the manager of the clearing-house, include the following : Every check must be stamped by the bank depositing it, according to the following form : Received payment through the Boston Clearing-house. Prior indorsements guaranteed. Bank of Boston by Cashier. The checks on each bank must be placed in a separate package, with a slip attached containing a list of the checks, the name of the bank on which they are drawn, and a footing; and the check ticket attached to the slip also must be filled out and the name of the bank and the footing of the checks placed thereon. Whenever there is but one check on a bank it will still be necessary to have the 'clearing-house slip attached, with the name of the bank and the amount of the check placed upon both slip and check ticket. These packages must be assorted alphabetically, according to the names of the respective towns in which the banks are situated, and must be de- livered by the messengers of the banks at the proper desks for the respective letters. By I o'clock P.M. on Saturdays, and on other days before half-past 3 o'clock p.m., each bank must send to the clearing-house, by its messenger, a ticket showing the total amount of checks left for collection that day, and re- •s ^ CO d Z 0) W =%^ ^ u 3 ^ ■Jiff c: o Li. § i at b * < < ■ CT3 r3 t/) . O ! .S2 o i_i o o T3 IS < H E i \?. o i 8 d '-' i i Z Q i i I < 1 T3 ^ ■> 1 "T3 CQ Q- 1 ^ OF THK '^ UNIVFRBTTY 274 CLEARING-HOUSES The formal order by which the transfer is made is shown in the second of the accompanying forms. Manifestly, it would be impossible for the manager of the clearing- house to ascertain from the reports just illustrated whether a given bank had traded to a single bank or to a number of banks, and also with what bank or banks the trade had been negotiated. This fact is determined by an order or orders upon the manager of the clearing-house from the cashier of each creditor bank which has nego- tiated a trade, to pay to a specified bank or banks certain portions of its balances each, such sum to be deducted from the balances due from the exchange of that day. For example, B, a creditor bank, gives an order on the man- ager of the clearing-house, signed by the cashier, to pay C, D, or E, or any one of them, a part of its balance, or the whole of the sum which it may have traded to them at the clearing-house. The manager deducts such an amount from the debit balances due the clearing-house by C, D, and E, respectively. Hence they are required to pay to the clearing-house only the difference between such orders and their debit balances. The manager also obtains another kind of receipt — namely, the orders to the clearing-house manager to pay to the authorized messengers the balances in cash due from the exchanges of that day. The form of this order is also shown in fac-simile herewith. The settlements of the amounts of all orders are made between the banks concerned, the debtor banks giving to the creditor banks cashiers' checks, currency, or ex- change for the amount of the trade, such checks always going through the exchanges on the following day. Sup- i \ \ \ CO X : ! © oi ^ ^ 03 ^ i •^ ^ *^ lU i : ^ P^^ ^ CO i i V3 / 13 iW § II I \l i 1 . (D II . II 1 II i3-ia\ib.oba N ii. ON 4 lu c i 1 a ^ J 1 ■ 11 tei i : si Ci . i I i : CO ■= If Ii lo i 1 •S : 3 S 11 II ; ' SOiiMII 6 k S ! j ii ^ 5 1 M Jl u 2/6 CLEARING-HOUSES pose, for example, B's debtor balance is seventy-five thou- sand dollars to-day, and that this amount is settled by a trade v^ith some creditor bank. B gives to the creditor bank a cashier's check for seventy-five thousand dollars, which the latter will send through the exchanges to-mor- row against B. Suppose also that in addition to the seventy-five thousand dollars, B's debit balance goes on increasing each day. It is evident that in that case B must cease to postpone an actual settlement by trading and instead make a cash payment at the clearing-house. This practice, it will be perceived, differs materially from that in vogue in Boston with respect to borrowing and loaning balances. In one case trades are made by the clerks; in the other they are restricted to one or another of the principal officials of the bank, who appears at the clearing-house simply for that purpose. In the one case interest is required; in the other it is not. In the one case the checks on the debtor members go through the exchanges on the following day; in the other they do not so pass through at once, but may be held over indefi- nitely. In the one case the trading is solely an element of mutual convenience to members; in the other case it is an element of gain to the creditor bank. Besides the regular members, there are nearly one hun- dred non-member banks clearing through the Chicago Clearing-house. In other words, there is an average of more than five to each member. In no other city in the country is the ratio in this regard so high. Most of those clearing in this way are private banks and trust com- panies. Since Illinois heads the Hst of States in number of institutions in this class, it is not surprising that the THE CHICAGO CLEARING-HOUSE 277 number in Chicago is so large, or that it should represent such a large fraction of the clearing-house business. Some comparisons will be interesting: In Boston the members and non-members clearing through the mem- bers are almost equal. In Philadelphia no members are allowed to clear for non-members. In New York the list of members and non-members is nearly equal, there being a few more non-members than members. At Chicago no compensation is required for clearing outside institutions, except that in some cases a certain deposit is required by a member from the non-member for which it clears. Each member is supposed to know the condition of the non-members clearing through it, and accordingly is held responsible for the checks of the non-members in the same manner as for its own checks. No statements are required for non-members, either by the clearing-house, or by the members through whom they clear; nor is there anything in the By-laws of the clearing-house that au- thorizes the examination of non-members. Members of the association are required to furnish the manager statements of their condition, in accordance with the following rule : " Each member of this association shall furnish the manager, as often as five times yearly, a sworn statement of its condition, at such times as may be designated by tKe Comptroller of the Currency for state- ments from national banks; and at such other times and on such other dates as the clearing-house committee may require. Said statements shall be made in form and man- ner prescribed for the above-mentioned statements from national banks. Said statements shall be open to the in- 278 CLEARING-HOUSES spection of the members of this association, but other- wise shall be held strictly confidential." Many of the Chicago banks voluntarily publish their statements, though no requirement of this kind is made by the Clearing-house Association. The daily clearings are the only regularly published statistics of the association. No items with restricted indorsements are allowed to go through the exchanges, the rule requiring that all indorsements on checks and other paper for deposit shall be in blank, or simply, " Pay to or order," without qualification. The expenses of the Chicago Clearing-house are met by an annual assessment of two hundred dollars upon each of the members, and the payment of the balance after that amount, according to the daily average of ex- changes sent to the clearing-house for the preceding three months. The fines upon the members, amounting to two hundred or three hundred dollars annually, are devoted to the payment of expenses. The total annual appropriation for this purpose has in the past averaged in the neighborhood of eight thousand dollars, but the increase in expenses incident to the new quarters, which, as before remarked, the Chicago Clearing-house is just about to occupy, will demand a considerably larger appropriation. The fines enforced by the Chicago Clearing-house are unusually heavy : For failure to be represented punctual- ly at the morning exchanges for the first five minutes or part thereof the fine is three dollars; for the second five minutes or part thereof, ten dollars; and for tardiness exceeding ten minutes, twenty-five dollars. So prompt, THE CHICAGO CLEARING-HOUSE 279 however, have been the members that the twenty-five- dollar fine has never been imposed, and in only a few instances has the ten-dollar fine been assessed. Banks desiring to become members make a formal application to the clearing-house committee. The latter thoroughly examines their condition and standing, and makes a report to the association. The applicant then may be admitted on receiving the affirmative vote of three-fourths of the members of the association. The members are required to pay an admission fee of one thousand dollars, and to assent to the Articles of Incor- poration and By-laws, thus being put upon the same footing as the original members. The By-laws provide that no new members shall be admitted except banks having their principal office located in the city of. Chi- cago, organized under the laws of the United States or under the laws of the State of Illinois, and having done business therein, with their subscribed capital stock fully paid in, for a period of at least six months prior to the application for membership. It is further provided that no new member shall be admitted except banks having a paid-in capital of at least five hundred thousand dollars, which capital shall be kept intact during the membership. The Assistant Treasurer of the United States, located in Chicago, may, upon application, be admitted to membership, without the payment of an ad- mission fee, but shall have no voice in the management. Any member may withdraw at pleasure, first paying its due proportion of all expenses incurred and signifying its intention to the clearing-house committee to with- draw. 28o CLEARING-HOUSES In many clearing-house associations it is easier to expel members than to admit them, the vote being a majority for expulsion and three-fourths for admission. At Chi- cago, however, the conditions of admission and expulsion are the same, the requirements in each case being a vote of three-fourths of all the members. In many of the most important cities of the country, clearing-house loan certificates have been issued from time to time, in seasons of great pressure — for example, as in the panics of 1873 and 1893 — thus giving elasticity to the currency in times of greatest need and affording relief to the banks from the terrific strain upon them. In Chicago, however, such action has never been taken, al- though in 1893 the subject was under serious considera- tion and a vote of fifteen to nine was cast in favor of an issue. At this time extensive loans were made to the members who were most in need, the loans amounting to one million seven hundred and forty-five thousand dol- lars. This represents the largest amount ever loaned in Chicago in this manner, and it was all repaid within sixty days from date. On other occasions, banks that have been temporarily embarrassed, and which upon the care- ful examination by the clearing-house committee were found to be solvent and in possession of collateral suffi- cient to secure their loans, have been promptly assisted by their fellow-members in the clearing-house, each fur- nishing aid in proportion to its capital and deposits. The Chicago Clearing-house has experienced various changes in the number of its members. The membership at one time was as high as thirty, and, as already stated, is at present only nineteen; yet the record of clearings THE CHICAGO CLEARING-HOUSE 281 shows an almost uninterrupted increase from the be- ginning of the organization. A table prepared by the association shows the total clearings for each year from the organization to date, and is of pecuHar interest, since it shows the marvellous growth of the business of the city, which in a very short period has attained the third rank among American financial centres, being sur- passed only by New York and Boston. No losses have ever occurred from the enormous trans- actions which have been repeated from day to day during the thirty-two years of the history of the association. These exchanges are conducted by two men — the man- ager and one assistant — and their record is embodied in four books. One contains simply the copy of the man- ager's proof-sheet, showing the debit and credit ex- changes and balances of each bank, and the total of the same for all the banks. Another book, the items in which are posted from the first, contains a record of the daily debits, credits, and balances of each bank, kept apart from a similar record of each of the other banks. The third book contains a transcript of the total clearings and balances by days, weeks, and months. The fourth book is a record of the amount and kind of money paid by and to the several banks in settlement of balances. From these records the total transactions of each bank with the clearing-house for a given period may be readily ascertained. The annual transactions beginning with 1865 have been computed and posted in this manner. In the rules of the Chicago Clearing-house due pro- vision is made for the administration of its affairs in all details. The several powers are lodged in a president, 282 CLEARING-HOUSES vice-president, manager, secretary, treasurer, and clear- ing-house committee. In addition, five directors are charged with the responsibility of attending to all matters pertaining to the corporate existence of the association, the Chicago Clearing-house being the only incorporated clearing-house at present existing in America. The annual meeting is held on the third Tuesday in January, when the officers, directors, clearing-house com- mittee, and manager of the clearing-house are elected by ballot. A majority vote of a quorum determines the result, a quorum being a majority of all the associated banks. At this meeting each member of the association must be represented by one or more duly authorized per- sons, and is entitled to one vote. Besides the general meetings, the president is required to call special meet- ings whenever he may deem it necessary, or whenever he is so requested by five members of the association, or by the clearing-house committee. The president and vice-president are constituted the officers of the association and must be elected from among the directors. Upon the president, and in his absence upon the vice-president, devolves the duty of presiding at all meetings of the association and of calling the special meetings under the conditions named above. The man- ager has immediate charge of all the business of the clearing-house, subject to the control of the committee. He supervises and directs the work of the clerks and mes- sengers while in the clearing-house, and, in addition, is ex-oiHcio secretary and treasurer of the association. As treasurer, he has charge of the funds belonging to the as- sociation and disburses the same on the order of the clear- THE CHICAGO CLEARING-HOUSE 283 ing-house committee. He is required to keep a correct record of all the money received and disbursed on account of the association, and to submit a detailed statement of the same at the annual meeting and whenever requested by the clearing-house committee. As secretary, he keeps the minutes of the proceedings of the association in a book provided for that purpose. His salary is fixed by the association and he is required to give a bond with sureties in a sum of not less than twenty thousand dol- lars, to be approved by the clearing-house committee. He is- required to report to the committee all violations of the Charter or By-laws that may come to his notice. He holds office until the next annual election, but is liable to suspension by the clearing-house committee or expulsion by the association. The clearing-house committee consists of five members and is elected by majority vote by ballot at the annual meeting of the association. Upon this committee de- volves the chief responsibility for the successful conduct of the affairs of the association. It is its duty when oc- casion demands to procure a suitable room or rooms for the clearing-house, with all necessary articles for the con- venient transaction of its business. The committee ap- points the necessary clerks, establishes rules to be ob- served at the clearing-house in cases not provided for in the constitution, but subject to the approval of the asso- ciation, and has general supervision of clearing-house affairs. The clearing-house committee determines the assess- ment of each member for its quota of expenses, and orders the payment of bills by drawing on the treasurer for the 284 CLEARING-HOUSES same. The committee hears and determines all disputes arising between members of the association, when submit- ted to it by the parties in dispute, thus performing a function sometimes discharged by a separate committee known as the " arbitration committee." A record of each case of dispute is kept in a book provided for that purpose, which book is kept at the clearing-house and is open to the inspection of all the members. The committee fills vacancies in the offices or other committees, and has power to suspend the manager and any clerk, and any member of the clearing-house, whenever such action is deemed advisable. Finally, it is the duty of the commit- tee, whenever it may seem to be necessary, to examine any member of the association and establish a scale of fines for errors, disorderly conduct, or other irregularities of the representatives of the members. CHAPTER XVII THE ST. LOUIS CLEARING-HOUSE Early History — Scope of Membership — Plan of Administration —Management of Clearings — Records Kept by the Manager. The members of the St. Louis Clearing-house Associa- tion have stood together with remarkable unanimity on the uniform rates of collection which were introduced on March i, 1895, ^"^ their success is justly attracting the attention of similar associations throughout the country. The St. Louis Association was organized in 1868, in the midst of the period of reconstruction and when the country was slowly recovering from the blight of civil war. At the beginning there were thirty-five members, and in five years the list had grown to forty-one. This was in the troublous time of 1873, when the institution of clearing-house loan certificates first became general, and which has since proved invaluable in similar crises. St. Louis joined the other leading associations at that time in the issue of these certificates, but to what extent it is not known, the records, unfortunately, having been lost in a fire. In subsequent periods of financial stringency, the association has not found it necessary to resort to the, issue of such certificates, although in 1893 some of the members were hard-pressed and obtained relief through the association. The membership has greatly diminished 285 286 CLEARING HOUSES since the date of organization, and, strange to say, is not half as great now as in 1873. Some failures have occurred, but the change has been due, in the main, to consoHdation and to voluntary liquidation. Originally, the membership embraced private banks, savings banks, and State and national banks, but now^ no private institutions are included. The present list com- prises nineteen members, there being ten State banks, eight national banks, and the German Savings Institution. Besides these, the Post-office and the Assistant Treasurer of the United States clear without the full power of mem- bers. The Assistant Treasurer pays nothing for the priv- ilege, but the Post-ofifice is assessed not in proportion to clearings, but a definite amount fixed at forty dollars a year. Banks may become members of the association by a two-thirds vote of all the members and by the payment of an admission fee of one thousand dollars, in addition to the annual assessment for expenses; but, before applicants can be referred to the association for admission, their merits must be passed in review by the committee of man- agement, and they must have a paid-up capital of not less than five hundred thousand dollars. Any member may be expelled by a three-fourths vote of the members, for violation of any of the Articles, By-laws, or Rules of the association. Likewise, any member may be suspended by the committee of management, provided a majority at least of the committee is present, and that the vote of those present is unanimous. It will be noted that the vote for expulsion is greater than that required for ad- mission. This is the reverse of the rule in most associa- THE ST. LOUIS CLEARING-HOUSE 287 tions, for, ordinarily, it is easier to get rid of a member than it is to admit him to membership. Besides the members, there are thirteen outside insti- tutions clearing through the association, five of which are trust companies, four are State banks, two are sav- ings banks, and two are national banks. The last named, and the Workingmen's Bank, (now Southern Illinois National Bank) are located in East St. Louis. The members clearing for outside banks and trust companies are liable for their checks and certificates of deposit, the same as for their own; and " their liability continues until after the completion of the exchanges of the morning next following the receipt of notice of discon- tinuance of such agency." Section 3 of Article i of the constitution provides as follows : " The officers of the association shall consist of a presi- dent and vice-president, who shall be selected from among the members of the association, and elected by ballot at a stated meeting in January, annually, and shall hold their offices until their successors are chosen and qualified, but shall not be eligible for re-election for more than two consecutive years." Most clearing-houses have embodied in their constitu- tions similar provisions, except that it is unusual to pro- vide that members shall not be eligible for re-election for more than two consecutive years. There are also elected at the same annual meeting a manager and committee of management, as opposed to the usual custom of appoint- ment of the manager by the clearing-house committee, and the election of the latter. In the hands of the com- 288 CLEARING-HOUSES mittee of management is placed the power to examine the books and accounts of any member of the association, whenever they may deem it necessary, and to employ ac- countants to aid in such examination. They are author- ized to suspend any bank from the privileges of the clearing-house until the association has an opportunity to act upon it. The president, or, in his absence, the vice-president, presides at all meetings of the association. He is required to call meetings of the same whenever, in his opinion, the interests of the association require it, or whenever re- quested to do so by the committee of management or any three members of the association. The manager, in addi- tion to the usual duties falling to his of^ce, acts as secre- tary and treasurer of the association. Each member is required by the constitution to fur- nish the manager, for publication, " as often as five times a year, a sworn statement of its condition, at such times as may be designated by the Comptroller of the Currency or the Secretary of State, for statements from national or State banks, and at such times and dates as the clearing- house committee may require. Such statements are made in the form and manner prescribed for statements from national and State banks, and are open to the inspection of members of the association." This provision applies with equal force to all banks not members of the associa- tion, clearing through members, but not to trust com- panies enjoying such privileges. Such statements are now published in the daily press. The expense of printing is not borne equally by the members, but is apportioned in the same manner as the THE ST. LOUIS CLEARING-HOUSE 289 other expenses. Each bank pays one hundred and twen- ty-five dollars annually, in advance, and the expenses necessary after that amount are assessed quarterly upon the members, according to the average daily amount of exchanges which each has sent to the clearing-house dur- ing the preceding three months. Each non-member, clearing through a member, pays one hundred and twenty-five dollars a year, in advance, the manager, in January, sending a draft for this amount through the clearing bank against said non-member. The fines, which amount to less than three hundred dollars a year, are collected from the banks by the man- ager and are paid by the offending clerks or by their banks, according to the nature of the offence. The total expenses of the association average about nine thousand dollars a year. We have now to analyze the operations as they take place at the clearing-house from day to day, and in this we shall find that St. Louis differs in some important de- tails from associations in the East. The clearing-room is a beautiful, centrally located apartment, and sufficiently elevated to command a delightful view of the city. Out- side of New York, it is the most commodious and best- lighted clearing-room in the United States, but it is not so artistically equipped as the clearing-room at Pitts- burg. On each business day the clerks appear at the clearing- room at 10.30 o'clock, except on Saturdays, and then at 9 o'clock, with their demands separately made out against each of the other banks, and with their items bound with a rubber band — not placed in envelopes, as is the case in UNIVE ^''l 290 CLEARING-HOUSES most large cities. A fac-simile of one of the lists used for the purpose is given in the illustration. Immediately upon his arrival, each clerk delivers his items at the desks of the several members upon which they are drawn. The settling clerks sort, according to the number of the banks, the packages as they are deposited by the de- livery clerks. In five minutes after the hour appointed for the ex- changes, the settling clerks are in position, and at the tap of the bell the distributing clerks proceed in line around the room, passing along the sheet containing a list of their exchanges, to be receipted for by the settling clerks. The credit and debit exchanges and the balances are listed by the manager in the usual way on his proof-sheet. After striking the balance, he calls off the credit and debit bal- ances and they are listed by the clerks on sheets prepared in blank form for that purpose, and taken back to their banks. The taking of such copies is optional with the members, it being intended for the information of any banks that may desire them. Hence the representatives of some of the smaller members do not remain to take them, but return to their banks immediately after the proof. One hour after the exchanges the creditor members return to receive their balances, whereupon the man- agei- issues to them his certificates of indebtedness by the debtor members, payable on demand to said creditor members '' without recourse upon any member of the association after 2 o'clock p. m. of the same day, except the debtor members named in such certificates, and ex- cept on half-holiday Saturdays, on which days the cer- Debit List St. Louis Clearing House,._.. From 1900 1 3 9 11 13 18 19 ai as 29 32 38 Assistant Treasurer United States.. Boatmen's Bank Fourth National Bank Franklin Bank German- American Bank 14 German Savings Institution 16 International Bank Mechanics' Bank Merchants'-Laclede National Bank. Continental National Bank National Bank of Commerce South Side Bank State National Bank of St. Louis. . Third National Bank American Exchange Bank Post Office 1 3 9 11 13 14: 16 18 19 21 26 21 28 29 32 Cltecks or other items cleared tltrongh a, Member of this Association on a Banlc or other Institution not a Member thereof shall be listed on and fastened to a separate slip, and the total footing of the slip entered as one itent on the regular clearing slip. The clearing of such items loosely or in any other manner than herein provided is prohibited. Lafavette Bank clears through ; North Western Savings Bank Bremen Bank Southern Commercial and Savings Bank. . 80. Illinois Kat'l Bank, East St. Louis. . Hississippi Valley Trust Co Union Trust Co Mercantile Trust Co St. Louis Trust Co Jefferson Bank Lincoln Trust Co First ^rational Bank, East St. Louis. . . . . 3 Boatmen's Bank. 9 Fourth National Bank. 13 Oerfflan-Amerioan Bank. 13 Oerman-Ameriean Bank. 18 Mechanics' Bank. 19 Merchants'-Laclede Hat. Bank. 19 Merchants'-Laclede Hat. Bank. 26 National Bank of Commerce. 28 State National Bank. 29 Third National Bank. 29 Third National Bank. 29 Third National Bank. Fac-simile of Debit List Used in St. Louis Clearing-house. 292 CLEARING-HOUSES tificates of indebtedness are issued without recourse upon any member of the association after ii o'clock a. m. of the same day, except the debtor members named in such certificates." Usually, the manager's certificates are cashed at the counter of the debtor bank upon presentation of the same by the creditor bank; but sometimes they are certified by the latter and sent through the exchanges against them on the following day. Some banks, however, refuse to certify, but give a cashier's check to a creditor member in exchange for a manager's check held against them, and the former is sent through the exchanges on the follow- ing day. Manifestly there is no occasion for the ap- pearance of the debtor members at the clearing-house in the settlement of balances. Immediately, however, after issuing his checks to creditor members the manager fills out a blank giving the clearings and balances, as shown in the illustration, and delivers the same to the debtor bank. In this way the member-banks know whether the amount of their balance, as reported to them by the clerk on his return from the exchanges, proves with that listed by the manager, and also what banks hold the manager's certificates of indebtedness upon them and in what amount. If the total of the manager's checks issued against them agrees with the amount of their balance, they know that to be correct the manager's checks pre- sented at their counter by the creditor members must agree with the amounts of the same as listed on the card by the manager. This custom of delivering cards is prac- tically unknown to other associations. ST^ LOUIS CLEARING HOUSE. Date 1900 Total Clearings, $ B.A.n:..A.ITOES_ Dr. Bank No. Or. . . 1 Assistant Treasurer U. S. . 3 Boatmen's 9 Fourth National 11 Franklin 13 German-American 14 German Savings 16 International 18 Mechanics' ....19 Merchants'.LacIede... 21 Continental 26 National Bank Commerce. 27 South Side ...28 State National Bank... 29 Third National ...32 American Exchange... 38 Post-Office ».. TOTAL Form Used for Listing Balances in St. Louis Clearing-house. 294 CLEARING-HOUSES The By-laws define proper matter for clearings as fol- lows: 1. All checks or drafts upon or certificates of deposit, demand or matured, of any member of the clearing-house, or any bank clearing through any member. 2. Any other matter specially agreed to by any mem- ber, or bank clearing through it, until notice is given to the contrary. 3. Mercantile or other paper payable at any bank, when such clearance shall have been authorized by the said bank, but not otherwise. Items with restricted en- dorsements and all notes, drafts, and bills of exchange not certified on the previous day are improper matter for clearing; also all unstamped and illegibly stamped items. Express money-orders, railroad and other pay checks are not, by the rules of the association, proper matter for clearing, but their clearing is allowed by consent of the banks at which they are payable and only on conditions prescribed by such banks. Such orders and pay checks " must be listed on separate slips, fastened together firmly with- the slips, and the full amount of them entered the same as one check upon the regular clearing slip." For violation of this rule, any member is liable to a fine of two dollars for clearing improper matter. The manager keeps the following records of trans- actions : 1. A record of the daily clearings and balances of each member. The same, by addition, is found for weeks, months, and years. 2. The clearings register showing the daily clearings, debits and credits, of each member. ST. LOUIS CLEARING HOUSE. IQOO Clearingrs, , . . $ BalanrsA, .... $ Mn. nfthit, . . . . $ Checks Favor. No. $ « a (( u ti Form of Manager's Report of Clearings, Balances, etc. 296 CLEARING-HOUSES 3. A record of total credit clearings of each member by months. 4. A record of the clearings, debit and credit, by months for each member, a total of the same being made at the end of the year. 5. A monthly and annual total of the clearings of all the members. 6. A condensed record of the published bank state- ments. Although, as we have seen, there has been a great de- crease in the membership from the original number, the volume of exchanges has gone on increasing, and the association now takes fifth rank among the clearing- houses of the country. CHAPTER XVIII^ CANADIAN CLEARING-HOUSES The Banking and Currency System of the Dominion of Canada — Limitations of Canadian Clearing-houses — Form of Gov- ernment — Routine of Exchanges— How Members in Default are Dealt with — Monthly Statements to the Minister of Finance — Records of Clearing-house Transactions. Preliminary to a consideration of the Canadian clear- ing-system, it is necessary, in order to facilitate the task of the reader in comprehending and appreciating its essential features, to set forth briefly the fundamental principles of the banking and currency systems of the Dominion. There are some thirty-eight chartered banking institu- tions in operation in Canada, with nearly five hundred branches, all organized under what is known as Section 85 of the Act of Victoria, Chapter 31, or "The Bank Act " assented to May 16, 1890. These banks are doing business in all parts of the country and in the leading cities of the United States as well. No limitations, numerical or geographical, are placed upon their crea- tion. For example, one bank has about forty branches, with one of them located in London, England. The combined paid-up capital of the banks acting un- der the Dominion Government Charter is in round num- bers sixty million dollars, each incorporated bank being 297 298 CLEARING-HOUSES required to have a capital of not less than five hundred thousand dollars.. In accordance with the following sec- tion of the General Banking Act, each incorporated in- stitution may issue notes to the full amount of its unim- paired paid-up capital : " The bank may issue and re-issue notes payable to bearer on demand and intended for circulation; but no such note shall be for a sum less than five dollars, or for any sum that is not a multiple of five dollars, and the total amount of such notes in circulation at any time shall not exceed the amount of the unimpaired paid-up capital of the bank." Since the unimpaired paid-up capital of the banks ex- ceeds sixty million dollars, bank-notes to that amount may be issued, although, as a fact, there are only a little more than forty milhon dollars of such notes out at pres- ent. There is a margin of nearly twenty million dollars for further expansion. ^ When the demand for money is active, as in certain seasons of the year or in prosperous times, the banks are able to keep out a large circulation, but when the tide begins to turn and the amount of labor diminishes, the notes begin immediately to flow back to the banks for redemption. The demand for currency, therefore, by its own free and unrestrained action, causes an expansion of the volume, and that, too, in proportion to the demand, while the abatement of that demand causes a correspond- ing contraction of the volume. By this admirable self- regulating process of expansion and contraction of the money supply, Canada has been particularly free from panics, which, with all their disastrous consequences, have CANADIAN CLEARING-HOUSES 299 sorely afflicted the industrial and commercial interests of the United States from time to time. There are only two forms of paper currency, one of which is the notes the banks issue, the other being the Dominion legal tender notes, the issue of which amounts to about twenty-three million dollars. This, with the forty million dollars of bank-notes, makes a total paper currency of more than sixty million dollars. Each "bank issuing notes is required to pay to the Min- ister of Finance and Receiver General a sum of money equal to five per cent, of the average amount of its notes in circulation. Upon all such deposits interest is received by the depositing bank at the rate of three per cent, per annum. Being required to deposit as a redemption fund only five per cent, of their note issue, and receiving three per cent, interest on that deposit, the banks find in their note issue one of their chief sources of profit, and hence they endeavor to maintain as large a circulation as pos- sible. The manner in which the notes of a bank return to it for redemption will be explained further on. Within recent years clearing-houses have been estab- lished in nearly all the leading cities of Canada, with re- sults no less gratifying than those attending the same movement in the United States. Halifax led the way in 1887, followed by Montreal in 1889, Hamilton and To- ronto in 1891, Winnipeg in 1893, and St. John, N. B., in 1896. Each clearing-house is working under a set of rules governing the action of the banks in their daily exchanges, and settlements of balances, and specifying the manner in which the government of the association shall be administered. 300 CLEARING-HOUSES In the preambles of the Constitution of the Hamilton, Halifax, and St. John clearing-houses, the objects of the associations are declared to be the effecting of a '* more perfect and satisfactory settlement of the daily balances " between the members, nothing being said of the equally important advantage of a more satisfactory method of exchanging items. At Toronto this latter feature is embodied in the statement that the purpose of the asso- ciation is facilitating the daily exchanges and settlements between the banks. There is no indication that the founders of any of those associations either intended, or supposed, that it would ever transcend the functions of a clearing-house of the first class, and indeed there has not been thus far a single instance where any other function has ever been per- formed. No uniform rates of charges for collection of items, no maximum rates of interest on deposits, no bor- rowing and loaning of balances at the clearing-house, no procuring of legislation relative to banking, no clearing- house loan certificates, and no bracing up of weak members are known to the Canadian clearing-house associations. It has been left to the Canadian Bankers' Association to do whatever is possible in securing proper legislation for the banks. The necessity for the issue of clearing-house loan certificates in the United States, as shown in another chapter, has been due, in the main, to the lack of elasticity in our currency, and since the bank- note issue in Canada obviates this weakness, there has been no occasion for the issue of such certificates. In Section 2 of the constitution of the Toronto Clear- ing-house, it is declared that the association shall not be CANADIAN CLEARING-HOUSES 301 used, either directly or indirectly, as a means of obtain- ing payment of any item, charge, or claim disputed or objected to, and that any bank receiving exchanges through the clearing-house shall have the same right to return any item, and to refuse to credit any sum which it would have had were the exchanges made directly be- tween the banks concerned, instead of through the clearing-house, and that nothing in the rules shall de- prive a bank of any rights it might have possessed had such rules not been made. The government of the various Canadian clearing- houses is vested in a board of management, chairman, sec- retary, and manager. The first named corresponds to the clearing-house committee in the United States, and per- forms similar duties. The board at Toronto consists of seven bank officers, elected each year. At their first meet- ing after their election they choose out of their own num- ber a chairman, a vice-chairman, and secretary-treasurer of the clearing-house. At Halifax and Hamilton the cashiers and managers of the several banks constitute a board of management, the chairman of which is elected annually. At St. John Section 3 of the Constitution de- clares that the managers or agents, or, in their absence, the acting managers or acting agents of the several banks, shall constitute a board of management, the chairman of which shall be elected annually. The board at Winnipeg is composed of a committee of five bank representatives. The chief duties devolving upon the several boards are to provide suitable rooms for clearing and to furnish the same with stationery and furniture, and whatever else is 302 CLEARING-HOUSES necessary; to exercise general control over the affairs of the association; to arrange for officers to act as managers from time to time, except where this duty is performed by a clearing-member; and to engage banks to act as clearing-agents for the receipt and disbursement of bal- ances due by and to the various banks. At Montreal the Bank of Montreal has been the per- manent clearing-agent since 1891. Prior to that time the members acted in this capacity in rotation, as do the members in the T>ther clearing-houses at the present time. The clearing-agent is responsible only for the money actually received by it from the debtor banks and for the payment of such money to the creditor banks. Each clearing-house makes its exchanges in a rented room. The manager's duties are not essentially dif- ferent from those performed by clearing-house mana- gers in the United States, except that in Canada they are in no way concerned with the receipt and the dis- bursement of balances by the clearing-bank. In the beginning it was necessary, in order to form a clearing-house in a given centre in Canada, for all the banks in the place to unite and become members, with- out regard to their integrity and financial responsibility. Hence, except where numerous new banks are organized, there are but few to become members. At Montreal there are fifteen members, at Toronto fifteen, at Hamilton and Halifax seven, and at St. John five, making a total of forty-seven banks belonging to these clearing-houses. No restrictions in regard to capital are placed upon applicants for membership, the requirement of the General Banking Act that each char-tered institution shall have at least five CANADIAN CLEARING-HOUSES 303 hundred thousand dollars capital being deemed sufficient by the clearing-house to afford the members a reasonable guarantee of its financial responsibility. So far no occasion has arisen for any expulsions, and the associations are practically without rules to govern their action in such emergencies. Apparently, they did not anticipate difficulties of this character. There is a clause in the Constitution of the Hamilton Clearing- house declaring that any bank making default in the pay- ment of its draft on Montreal for balances against it, by the specified time, or refusing to pay on presentation a settlement draft given to the clearing-bank, shall imme- diately cease to be a member of the association. The terms upon which withdrawals can take place are very clearly defined in the several constitutions, although no member has ever withdrawn. The articles in the dif- ferent constitutions are substantially the same, but differ slightly in phrasing. The following is from the Hamilton Constitution : " Any bank may retire from this associa- tion by giving written notice to the chairman of the board between the hours of i and 3 o'clock p.m., and paying its share of any expenses which may be then due, the re- tirement to take effect from the close of business of the day on which such notice is given. It shall be the duty of the chairman to promptly notify the other banks of such withdrawal." The only failure that has occurred in the clearing-house membership in Canada was that of the People's Bank at Montreal, which liquidated with open doors. The failure was the result of maladministration. The bank was a unique institution, having been organized at a very early 304 CLEARING-HOUSES day under a private charter, which, once out of existence, can never be revived. Under the branch system the head office is a member of the clearing-house in the city where it is located, provided a clearing-house exists there. Its various branches which are situated in cities where clearing-houses are located are members of the clearing-house associations there. In this way a given bank may be a member of several associa- tions, and may be, as well, a member of one or more asso- ciations in the United States, through its branches located in this country. No such practice as the clearing of non- members through member-banks obtains in Canada, the occasion being avoided by the system we have just de- scribed. The exchange at Halifax takes place at 9.30 o'clock; at St. John at 9.40 o'clock; at Montreal, Toronto, and Win- nipeg at 10 o'clock; and at Hamilton at 10.15 o'clock. Each bank, at the appointed time, sends one or more rep- resentatives to the clearing-house with its items and cur- rency, enclosed in envelopes, for each of the other banks. The exchanges are made in the usual manner, after which the delivery clerks return to the several banks with the packages, while the settling clerks remain till the proof is made. Ten minutes of grace are allowed at Montreal for the arrival of the clerks, but in no case will the manager delay the clearings over ten minutes. Preliminary to his giving of the signal to begin the ex- changes, the manager calls out, " Ready ! " whereupon the clerks all station themselves in their proper places, and at the tapping of the bell begin clearing. The desks are so arranged that it is necessary for the delivery clerks No. lO. TORONTO CLEARING HOUSE. IMPERIAL BANK. Delivery Statement. 1900 No. Bakkb. Dr. Amounts. SlQNATUKE. NO. 1 2 3 4 5 6 7 8 Bank of Montreal 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Canadian Bank of Commerce- . Merchants Bank of Canada- - . Bk. of British North America. Bank of Nova Scotia Molsons Bank Bank of Toronto Ontario Bank g 10 11 12 13 14 15 Imperial Bank Standard Bank Union Bank Traders Bank Bank of Hamilton Bank of Ottawa Form of Delivery Statement Employed at Toronto. 3o6 CLEARING-HOUSES to pass along behind the settling clerks while depositing their packages. Each carries a list of the '' amounts de- livered " or " delivery statement," upon v^hich each set- tling clerk writes his initials as a receipt against the amount of the package delivered to him, all as shown in one of the illustrations. A small ticket containing the amount of the packages is attached to the exterior, and immediately upon re- ceiving the package, the settling clerk detaches the ticket and transcribes the amount on his settling sheet. In this manner all the amounts are listed, after which the footings are made and the difference taken between the amounts delivered and the amounts received — such difference constituting the credit or debit balance. Before the exchanges begin, the manager, at his desk in one corner of the room, receives from each clerk as he enters the room a " First Delivery Voucher," containing the amount of the exchanges brought to the clearing- house. Each settling clerk, immediately upon striking his balance at the conclusion of the exchanges, makes out what is called the " Second Delivery Voucher," contain- ing the amount received, amount delivered, and the bal- ance, and hands the same to the manager. This, in the Toronto Clearing-house, is in the general shape of a check, say three and one-half inches deep by eight inches long. A fac-simile appears among the illustrations. The manager immediately transcribes the amount re- ceived and the balance on his settling sheet (the amounts delivered having been already transcribed), and proceeds to foot up the four columns and strike the balance. The c 1 . 1 i j CC 1 i i U) «*. i i 3 i i O j (9 i $ • i ^ i K. K i Ul .,■■ CO ^ I CO : :d ^ ^ s 1 (D ' ^ !SC ck: £ ^ 'SC ^ ^ UJ c Q: c o p: K ^ s 1 . Q: 1 o K K 1 i i • o Q i 1 * i <0 1 UJ ^ ^ i £ i 308 CLEARING-HOUSES form employed for this purpose is shown among the illus- trations. If the amounts delivered and amounts received agree, and the amount due to the clearing-house and the amount due by the clearing-house tally, the work is correct and the result is so announced by the manager. But if there is a discrepancy, the settling clerks examine their sheets anew, and if it is found in the exchanges, they make a new footing of the columns and also compare the amounts on the small tickets with the amounts listed therefrom on their sheets. If the error remains undiscovered, the clerks call off to each other to see if the amounts deliv- ered agree with the amounts received. If the footings have been made correctly this ought to disclose the error. If, on the other hand, the discrepancy occurs in the amount due to the clearing-house and the amount due by the clearing-house, it is the result of an error in sub- traction, provided there is no error in the columns of ex- changes. Such an error is rectified by a revision of this part of the work. The manager sounds the little bell, to indicate that the proof is made, whereupon the settling clerks repair to their separate banks with their second de- livery vouchers. The delivery clerks, as already noted, return with the items received to their respective banks at the conclusion of the exchanges. At II o'clock the manager returns to the clearing- house and makes out a list of the balances, which is used as a basis of settlement at the clearing-bank. At the same time he signs the vouchers made out by the set- tling clerks, indicating the amount of the credit or debit balance, as the case may require. The credit vouchers C y • 2 ) i i 1 i 1 H i ^ ^ Uj 0) c \ \ 1 : 1 :d '■ s :t 1 o K t 1 c ; ^ i 1 (D d 1 ^ i i ; 2 5 c : 2 i i 1 Uj 2 ^1 d 1 d c ft c ! a Q o K 1 1 S 1 ^ ^ S O 2 6 K i Q 1 d 1 ^ % K O 5 Li ^ S o 310 CLEARING-HOUSES are printed in black ink and the debit vouchers in red ink, each being countersigned by the settHng clerk. Across the face of the credit voucher is written the re- ceipt for the balance, and the ticket is delivered to the set- tling bank when the balance is received; and on the face of the debit voucher is the receipt for the balance paid into the clearing-bank, such receipt being signed by the teller of the clearing-bank and retained by the debit bank. The clearing-houses in the United States take no cog- nizance of errors in the items contained in the packages, but leave to the banks interested the adjustment of any diflFerence that may arise; but in Canada a different cus- tom prevails. At Montreal the banks have until 11.30 o'clock to examine the items received in the morning ex- changes and to return any voucher for five thousand dol- lars or more, on the ground of no funds or not sufficient funds, whereupon it is the manager's duty to demand a new settlement. It would not be regarded expedient nor desirable to return to the clearing-house at 11 o'clock, were it not for the advantages thus afforded the banks of making such examinations of their items, and, if the case may require, of demanding a new settlement. The occasions are exceedingly rare when a new settle- ment is necessary, and it is, therefore, regarded by many members as an unnecessary sacrifice of time and energy for the manager to return to the clearing-house to list the balances and to sign the vouchers. It may well be asked whether it would not be an equally safe and more con- venient arrangement as well to dispose of this work im- mediately after striking the original balance, with the un- derstanding that any bank, finding it necessary to do so, d M o c ) ^ > 1 . a> . i '■"" o » d g H 3 Q i 1 Q 1 H H - > ^ ' W u. , ^ c c '1 ) i! DC i 0^ 1 |i ^ 02 1 i^ 1 cn ) i' c ) 1 » _ D: -» s < = u c ^ 1 ? z - ' 1 ^l^_ :, i! « DC • • < U: 1 ! : : y c 1 > OMMERC Canada RTH Am 0 w M oiTi-in 312 CLEARING-HOUSES should be permitted to return its voucher, in the same manner and under the same conditions as above, pro- vided the manager is notified before 12 o'clock, or any other hour agreed upon, of the same day. At Toronto a bank objecting to any item delivered to it through the clearing-house, or to any charge against it in the exchanges of the day, is required, before notifying the manager of the objection, to apply to the bank inter- ested for payment of the amount of the item or charge objected to, and such amount must be immediately paid to the objecting bank. Should such payment not be made, the objecting bank may before, but not after, 12 o'clock notify the clearing-house manager of such ob- jection and non-payment, and he must thereupon deduct the said amount from the settling sheets of the banks concerned and readjust the clearing statements and de- clare the correct balance, in conformity with the changes so made. It will be observed that this differs somewhat from the Montreal plan. At Toronto the manager is not required to return to the clearing-house, unless an item is objected to. An effort is made by the objecting bank to adjust the difference with the other bank before calling upon the manager for a new settlement, and no minimum amount is specified of the amount of the item that may be objected to. At Halifax all errors in the exchanges and claims, arising from the return of checks or from other causes, must be adjusted by 11.45 o'clock of the same day, directly between the banks concerned and not through the clearing-house, except in case of the refusal or ina- bility of a bank to promptly refund to the bank present- 1 <0 J J Q: iw <3> '^ 5 «0 ^ U ■"^ i -J * o i^ • 1 Q is 13 i IS ^ i ii ^ s : -4 o (0 i I!; 1 ■ ! :3 1 ^ 1 I o ? [ 3: IS i i^ Q: ^K.. a:- \ \ |.. 5 K y -J o UJ i o -I •2A/^At^c ' 03 AI303d^ o •^ t o u o K • » K ^' S o Q % UJ o CO 1 i ARINQ HOU Q (3 s 1 o ERSh j K d e ^ i 8 314 CLEARING-HOUSES ing such checks, drafts, or other items returned, when the banks holding them must report to the clearing- bank the amount of the same, and it is the duty of the clearing-bank to take from the settling sheets of both banks the amount of such items and readjust the clear- ing statements and declare the correct balance, accord- ing to the changes so made, provided such report is given to the cashier or manager of the clearing-bank not later that 12 o'clock of the same day. At St. John practically the same rule is in force, ex- cept that all claims of one bank upon another, arising from the causes above described, must be paid in legal- tender notes, immediately on demand of the returning bank, and in case of non-payment it is necessary, in order to obtain a new settlement through the clearing-house, to notify the manager of the non-payment before 11.30 o'clock instead of 12 o'clock, as in the former instance. At Hamilton such errors must be adjusted by 11.30 o'clock of the same day, directly between the banks con- cerned, and to secure a new settlement through the clear- ing-house a report of the amount of the discrepancy must be made to the cashier or manager of the clearing-house not later than 12 o'clock of the same day, as compared with 1 1.30 o'clock at St. John. Balances resulting from the morning exchanges are paid by the debtor banks at Halifax between 11.30 o'clock and 12.30 o'clock, and at all the other associa- tions between 12 o'clock noon and 12.30 o'clock, and in each case they are paid not to the manager at the clear- ing-house, but to the bank selected to act as clearing- agent. Drafts on Montreal are used at Hamilton as the (0 tt ft 0> i ^ 5 « *^ % > 1 ^ 2 O $ ui Q li CO s Q ^ i: I o i 2 ^ 1 * hi CO ! o ^ -. I , ^ LEAR o o 3: UJ CD ^_ 1 ' , ^ "^ 1 $■■" 5 51 o ^ 1 ^AI303d^ ti; ^ ? 1 5 c it 4 ! 1 fe o ^ % ^ o 5 K -J S Q Q: a . s \ i d ^ \ S *i K , 1 \ ^ 1 1 j :) 5 %. >» 8 i ■s 1 3i6 CLEARING-HOUSES medium of settlement, and Dominion legal-tender notes of large denominations at all the other clearing-houses. The different associations vary not a little in their method of dealing with members making default in the payment of balances within the specified time. At Ham- ilton, where settlements are made by drafts on Montreal, no rules are laid down for the guidance of the association. At Winnipeg a bank failing to pay its balance within the appointed time, is required to return all items received through the exchanges before 12.30 o'clock, unmarked and unmutilated, to the clearing-house, whereupon each of the other banks is notified of such action and required to return immediately to the clearing-house all items which may have been received from the bank in default, or pay the amount thereof to the clearing-house, and the clearing-house manager is required to adjust the settlement of balances anew. At Halifax the banks holding items against the default- ing bank are required to furnish forthwith to the clearing- bank the amount of such balance in proportion to their re- spective balances against the defaulting bank, resulting from the exchanges of that day, and the amounts so fur- nished to the clearing-bank constitute claims on the part of the responding banks respectively against the default- ing bank. The same rule obtains at St. John as at Win- nipeg, but at Toronto the case is peculiar. The rule is as follows: " Should any bank make default in paying to the clear- ing-bank its debit balance within the time fixed by this rule, such debit balance and interest thereon shall then (thereafter) be paid by the bank so in default to the chair- CANADIAN CLEARING-HOUSES 317 man of the clearing-house for the time being (interven- ing), and such chairman and his successor in office from time to time shall be a creditor of and entitled to recover the said debit balance and interest thereon from the de- faulting bank. Such balances, when received by the said chairman or his successor in ofifice, shall be paid by him to the clearing-bank for the benefit of the banks entitled thereto." At Hamilton, besides the regular checks, only certi- fied notes and bills of exchange are received through the clearing-house. Sight drafts and uncertified, as well as certified, items are considered proper matter for clearing at Toronto. At Winnipeg drafts, notes, and bills of ex- change are not cleared unless certified by the banks on the previous day. At Montreal, owing to keen competition between the banks, certification of such items on the pre- vious day is not always required. In addition to checks, drafts, notes, and bills of ex- change, bank-notes are cleared in all the Canadian clear- ing-houses. This constitutes one of the most interesting and important features of the exchange. In the daily course of business, each bank in a given city receives notes issued by the other banks. These are assorted ac- cording to the banks issuing them, and carefully counted, as a rule, by two persons, and placed in packages, which are placed in still larger packages, containing checks and other items, and then sealed and sent through the exchanges on the following day for redemption. The amount of currency thus cleared from day to day va- ries from ten to twenty per cent, of the other exchanges. None of the Canadian clearing-houses require state- 3 1 8 CLEARING-HOUSES ments of their condition from the member-banks. A sat- isfactory knowledge of their standing is obtained through the monthly statements required by Section 85 of the General Banking Act. The section in full is as follows : '' Monthly returns shall be made by the bank to the Minister of Finance and Receiver-General in the form set forth in Schedule D to this act, and shall be made up and sent in within the first fifteen days of each month, and shall exhibit the condition of the bank on the last juridical day of the month next preceding; and such monthly re- turns shall be signed by the chief accountant and by the president or vice-president or the director or principal partner then acting as president, and by the manager, cashier, or other principal oflficer of the bank at its chief place of business. Every bank which neglects to make up and send in, as aforesaid, any monthly return required by this section, within the time hereby limited, shall incur a penalty of fifty dollars for each and every day after the expiration of such time during which the bank neglects so to make up and send in such return; and the date upon which it appears, by the post-office stamp or mark upon the envelope or wrapper enclosing such return for trans- mission to the Minister of Finance and Receiver-General, that the same was deposited in the post-ofifice, shall be taken prima facie for the purposes of this section to be the date upon which such return was made up and sent in." In addition, the Minister of Finance and Receiver-Gen- eral may call for special returns from any bank, when- ever it may be deemed necessary to afford a full and com- plete knowledge of its condition, and any bank failing to CANADIAN CLEARING-HOUSES 319 send in such special return within thirty days from the date of the demand therefor by the Minister of Finance and Receiver-General incurs a penalty of five hundred dollars a day for the continuance of such neglect. The re- turns are very exhaustive. Eleven items are included un- der liabilities, and twenty-one under assets, besides many items of a general character not included under either. The transactions at the Canadian clearing-houses are recorded, but in no case are those records extensive and elaborate. They agree in the main with the records kept by similar associations in the United States. At Mont- real a record, is kept of the amounts brought or delivered at the clearing-house, with totals of the same for each year. No book with copies of the manager's proof-sheet is kept, as is commonly done, but the proof-sheets them- selves are preserved. The other associations keep more or less extensive records of the most important and es- sential parts of the daily transactions. The expenses are always divided equally among the members, and, as a rule, are paid quarterly. The manager and the paying teller at the clearing-bank commonly receive a small compensation, while in the smaller associations little more than the expense of printing is required. In no case are fines imposed, although the need of some such deterrent force is not infrequently felt. Something of this soft, it would seem, is necessary to secure prompt- ness in the discharge of the various duties connected with the exchanges and the management of the clearing-house affairs. In this neglect (if such we may call it) the Cana- dians have followed their English cousins rather than their American neighbors. 320 CLEARING-HOUSES The clearings of the several clearing-houses in Canada for twelve months, December to November inclusive, 1897-98, as compared with the same period 1898-99, are given below : 1897-98 1898-99 Montreal $718,624,000 $794,197,000 Toronto 430,140,000 501,314,000 Halifax 61,276,000 68,386,000 Hamilton 3S,392,ooo 39,898,000 Winnipeg 90,746,000 105,524,000 St. John 29,336,000 32,405,000 The clearings in Vancouver and Victoria for the same period in 1898-99 were as follows: 1898-99 Vancouver $41,325,000 Victoria 33,369,000 The branch system of banking, in which the parent in- stitution is virtually a member of several clearing-houses, renders a uniform set of rules for the several houses a de- sideration, and such a reform in the near future may rea- sonably be expected. Other features, such as the adop- tion of a separate exchange for notes by the association at Montreal, and a system of fines by all the associations, may, in time, be introduced. CHAPTER XIX THE LONDON CLEARING-HOUSE Early History — Stimulated by the Example of New York — " Out-clearers " and " In-clearers " — Morning Clearings and Afternoon Clearings — The Final Balance — Detail of Methods. The utility of clearing-houses has been dwelt upon in other pages of this book. The history of the clearing- house in America has also been set forth, but in that his- tory there has been no indication that the clearing-house system of this country was borrowed from that of any other. In fact, it appears that a clearing-house, in what- ever general division of the world it may exist, is a growth or development, something proceeding from well-defined causes and springing into existence to meet a clearly ex- pressed want. It is possible, and even probable, that some of those who were responsible for the organization of the first clearing-house in America knew somewhat of the existence of the clearing-house in London, but that the latter was inadequate as a foundation upon which to base the American institution or exercised any influ- ence upon the plans of these projectors will be perceived at once by the reader of the particulars of the great English institution which follow. The origin of the London Clearing-house seems to be shrouded in doubt and uncertainty. It was presumably 321 322 CLEARING-HOUSES at the outset an institution of so little importance that the historians of the day paid no attention to it. It was a mere convenience to bankers and an adjunct that had not de- veloped into any considerable importance. The history of the institution, as recorded, goes back as far as 1773, for on that date, in the books of Martin & Co., bankers of London, appears the entry of a charge for the use of the clearing-room. The rent for a quarter would appear to have been 19s. 6d., certainly not an exorbitant charge nor one to indicate either expensive or elaborate quarters. After this gleam of light, merely showing that the insti- tution existed, darkness again settles over the subject, but it is believed that in 1775 a building in Lombard Street was used by the bankers of the English metropolis for clearing purposes. The evidence of this fact, as ap- pears by the writings of English financial historians who have investigated the subject, is not at all positive. It is recorded of the early London Clearing-house that the object in view was that of reducing the amount of actual money to be used in settlements, a fact which shows that the effort, by whatever name it was called and however managed, was along the same general lines as are followed by the clearing-houses of the present day. From this early beginning, the system that is now in use in London was undoubtedly developed. It further appears, by the meagre scraps of history that are avail- able, that at the outset many of the bankers of London were opposed to the idea of co-operative clearings, but as the advantages of the method were developed this op- position was gradually withdrawn, and early in the cen- THE LONDON CLEARING-HOUSE 323 tury, say about 18 10, no less than forty-six banking con- cerns were represented in the London Clearing-house. No authentic records, however, have been discovered of the transactions of the clearing-house of a date earlier than 1840, and those which are available for inspection, at even that comparatively recent date, are so imperfect and contain so little detail as to be of small value. After the New York Clearing-house had been estab- lished and had demonstrated its right to existence it at- tracted the attention of London bankers. It was not until the new world had set an example in this respect that English bankers began to give serious attention to those details of clearing-house work which are at present so highly valued everywhere. It was at that time that statis- tics of transactions began to be systematically collected and tabulated. The relatively perfect system established in New York aroused the managers of the London Clear- ing-house to an appreciation of the advantage of correct records, and caused them to introduce, in part at least, some of the methods which New York had put into operation. The present London Clearing-house is situated in Post-ofifice Court, Lombard Street. The clearing-room is on the ground-floor. Architecturally, the building has very little to recommend it. Practically, there is little more than an entrance-door and windows for let- ting light into the clearing-room. The general appear- ance of the entrance may be gained by a glance at the frontispiece of this book, which is a reproduction of a recent photograph. That the methods in vogue in the London Clearing- 324 CLEARING-HOUSES house differ materially from those employed in New York, or in the other leading clearing-houses of Amer- ica, will perhaps be assumed by everyone who has con- trasted English and American methods of banking. It would seem as a fact that our English cousins have not succeeded in those labor-saving details and refinements of method which are so thoroughly identified with American practice. Even a casual inspection of the methods of work in the London Clearing-house shows at once, by sharp contrast, the advantages of American drill and discipline, as exemplified in the New York Clearing-house. To show that we are not speaking from a standpoint of prejudice in this regard, we present herewith an ex- tract from a work by W. Howarth, Fellow of the Royal Historical Society, published in London in 1884, which may be regarded as a strictly disinterested de- scription : " The men who transact the clearing business for the various banks are called * clearers.' Each bank has two sets of books ruled, the columns being headed with the names of the different clearing-banks. One of these sets is used at the bank itself, the other at the house. The men who enter in the ' clearing-books ' (as they are called) in the bank are called * outclearers,' while the men whose work is in the * house ' are in like manner designated the ' inclearers.' " The * outclearers ' in the morning send the various cheques secured by their bank on the other clearing- banks, in alphabetical order, having done which, they at once enter them in the ' outclearing ' books under the THE LONDON CLEARING-HOUSE 325 names of the different banks. When the first lot is en- tered, the batches of cheques, or ' charges,' as they are called, on the respective banks, are cast up, the cheques pinned together, or ' screwed up,' and the total entered on the back of the last article. '* When all this is done, the clerk takes the charges, numbering in all 2y, and, placing them in his case, makes off for the house, where he is supposed to be between 10 A.M. and II A.M. Arriving there he goes around the building, depositing his charges on the desks of the dif- ferent banks on whom the drafts are drawn. Each bank does this, and consequently, as there are twenty-eight banks in the house, the ' inclearers' will find on their desks on their arrival, or shortly after, twenty-seven bundles of cheques, etc. The ' inclearers ' take with them the * in books ' and at once enter the various charges under the headings of the several banks, casting each when entered, and seeing if the cast corresponds with the total on the back of the last cheque. Should the totals not agree, the clerk sings out in a loud voice the name of the bank with whose total he differs, and the representative of that bank is obliged to go to the desk of the complainant and take with him his * outbooks.' The items are then run over and the mistake detected and rectified. When the * in- clearer ' has entered and agreed all the charges on his desk, he puts the cheques, etc., in his case, and returns to his office, taking with him his ' outbooks.' " The morning clearing is generally over by noon. On arriving at his bank, the clearer hands the drafts over to the clerk whose business it is to pay the clearings, who examines the articles, and if everything be regular, and 326 CLEARING-HOUSES the customers have the money, pay them. The afternoon clearing commences at 2.30 p.m., by which the ' out- clearer ' has repeated the process already described as comprising the morning out-work; and a runner is de- spatched to deliver the charges as in the morning. As the ' outclearer ' receives drafts from the waste book and other sources, he sorts and enters, but seldom, except on a very slack day, has time to put an amount on any but the first lot. Thus he goes on till 4 o'clock, when, the cashiers taking no more credits, he receives no more cheques; he then casts his books and, taking them with him, proceeds to the house. '' In the meanwhile the ' inclerk ' is also at his post at 2.30 p. M. and finds awaiting him several charges which he enters on, as a continuation of the morning work. As the time passes the runner makes his appearance more frequently and the charges drop on his desk often, and still more often. The runner from his own bank also con- stantly takes from his book the charges he has ' dealt with,' hastens with them to his office, and hands them to the paying clerks, who examine and despatch them with all speed to the men on the cash books or ledgers. " The house is prone to indulge in a little fun during the early afternoon, occasionally bursting forth with a * gloria ' or bit of the National Anthem, or other vocal display not quite so edifying, but as three o'clock comes and goes, the pressure of work leaves no time for foolish frivolity. " Between half-past three and four, nought is heard but the hurried tread of the runners, the dropping of the charges, the scratching of the pens, and the rustling of THE LONDON CLEARING-HOUSE 327 paper, as the ' inclearers ' with lightning-like rapidity run the items in their in-books and cast them up. " A quarter to four : the passages are thronged, the pressure more intense, the pens of the clerks seem like ex- press trains running down inclines, so great is their rate of movement, the charges are more frequent and heavy, and drop about the books and heads of the poor clearers like hailstones in a thunder-storm. Five minutes to four : if anything a still harder pull. Four o'clock : the runners are pouring in fast, bawling out their names, and almost more than that, for they rush in and out of the building like so many men escaped from Bedlam. " Five minutes past four : the white hand of the three- handed clock, which is just five minutes behind the min- ute hand, is on the four; the bell strikes; the doors are bolted, and from all parts of the room, in various keys, sometimes harmonious, though often otherwise, there arises a prolonged * oh, oh, oh, oh ! ' a kind of raising the safety-valve, a letting ofif of surplus steam, a returning to the ordinary pressure of their business, after having been for so long screwed up to such an abnormally high ten- sion. The striking of the bell at 4.05 p.m., regulates the closing of the door, which means the cessation of any de- livery of charges other than those in the house at the time. '' At ten minutes past four, the bolts are again drawn and a general stampede takes place of runners hurrying with the ' last lot of stuff ' to their several banks, the re- « ceipt of which sets the whole of the internal machinery of the great clearing-banks running with redoubled vigor. " But the house ! as soon as the ' inclearer * has got all 328 CLEARING-HOUSES the charges off his desk — in other words, when he has entered the last check or draft — he casts his book. By the time he has finished doing this, the ' outclearer/ as already mentioned, has made his advent at the house, bringing with him his * outbooks.' Most of the smaller banks divide the clearing-banks into two sets, and use two books, making one book do for each set, and one clerk for each book; but for the larger banks there are many subdivisions, still the principle is the same. The grand arrangement is that these ' in ' and ' out ' books are exact counterparts of one another, so far as the ruHng and heading are concerned. " Therefore when at some minutes past four in the af- ternoon the clearers at the house receive the * outbooks,' they are immediately handed over to the ' inmen,' so that each man has the * outbook ' corresponding with his ' in- book.' " Now of course it is clear to all our readers that the ' in ' work of any bank must be the ' out ' work of the other banks, because the checks to be collected by any bank are despatched to the house and distributed, when the * in ' clerks of the several banks enter the various charges in their * inbooks,' that is to say, they enter in their ' inbooks ' the charges they have to pay. The clear- ing clerks then arrange their books so that the ' outbook ' is on their left hand, and the ' inbook ' on their right — i.e., the book which contains the articles to be received is on their left, while the book containing the articles to be paid is on their right. The * sheet ' is then taken, and on it the clerk next bestows all his attention. A specimen of this ' sheet ' on which the balances are entered is as follows : THE LONDON CLEARING-HOUSE 329 Debtors. The Bank. Creditors. Alliance Barclay Barnett Bennett Bosanquet Brown Capital and Counties Central City Consolidated County Dimsdale Fuller Glyn Imperial Joint Bank London and Southwestern London and Westminster Martin Royal Exchange National National Provincial Prescott Robarts Southwark Smith Union Williams County Clearing C. H. " This form is in reality a summary of the day's pro- ceedings, for when complete, it is a statement of the exact position which each individual bank bears to all and each of the clearing banks. " From a quarter past four to five o'clock there is the hurrying of the clearers from one desk to another, shout- ing out for the different clerks, calling off amounts, cries of UNIVERSITY j 330 CLEARING-HOUSES * charge you/ ' pay you/ and so on, apparently a perfect Babel. The noise, which seems to betoken cessation of work, is really a cloak, as it were, to the busiest time of the whole day, for a settlement must be made of all the transactions, and the clerks are agreeing their difiFerent totals and casts, checking amounts. The rapidity with which the mental calculations are made is simply marvel- lous; the clearers run up column after column of figures with their eyes, dotting down totals as they go on, and with the majority it is a strange exception to find an error. " Remember, there is working and working — ^working in a bank is one thing, for there is some noise and dis- tracting influence; but working in the clearing-house is like working in a place where everything tends to dis- tract and deter the mind from action. " With a man on this side and another on that, both shouting out different questions to him at the same mo- ment, with a clerk from * Glyn*s ' yelling out for the cast of ' his side,* with the * Union ' man calling at the top of his voice to know whether he has his ' books ' (out) down yet, with the ' Imperial ' man asking for the amount of some item or other, the clearer has to remain calm, un- moved, and withal alive in every faculty to the situation, casting as if he were in solitude and alone, undisturbed by any, going on in his own way. When he has marked or ticked all his balances, he returns to his desk and waits. " In the meantime, while all these things have been tak- ing place at the House, the runner has delivered his drafts (which he took from the ' inclearer's ' box) to the proper authorities of his establishment, by whom they are ex- THE LONDON CLEARING-HOUSE 331 amined as speedily as possible. All those cheques, etc., which the bank officials cannot pay, are despatched forth- with back to the House. The ' inclearer ' at once enters them on the ' debtor ' side (left hand side) of his sheet at the end after the cast, and then finally casts up that side. As soon as entered, the ' returns ' are distributed just in the same manner as are the charges in the afternoon. " As the clearer sits at his desk, he receives the returns sent to him by other banks, and these he enters on the creditor (right hand) side of the sheet. At five minutes past five the bell once again strikes, the clerk runs up his sheet, casting it finally, and strikes the balance, which, if it be a debit one (say £15,009, is. 6d.) he enters on a little form printed in red, thus : Drs. Messrs To General Balance. ;^i 5.009 IS. 6d. " If, on the other hand, he has to receive, say £29,347, 2s. 6d., he uses a similar form printed in black : Crs. Messrs. . . . To General Balances. £2g,347 2s. 6d. 332 CLEARING-HOUSES '' Having filled up this little form, he next proceeds to write his ticket, which will be a ' green,' if he is to receive on account of the day's transactions, a * white ' if he has to pay. The green ticket runs as follows : SETTLEMENT AT THE CLEARING-HOUSE. London, l88 To the Cashier of the Bank of England. Be pleased to Credit our Account the sum of , out of the money at the credit of the account of the Clearing Bankers. £ Seen by me Inspector of the Clearing-House. " This is the left hand half of the ticket; the right hand is somewhat different, thus : SETTLEMENT AT THE CLEARING-HOUSE. Bank of England. i88 To Account of Messrs has this evening been Credited with the sum of , out of the money at the credit of the account of the Clearing Bankers. For the Bank of England, £ " If it happens that the clearer has to pay on account of his bank, he then fills up a white form, the left and right hand halves of which are as follows : THE LONDON CLEARING-HOUSE 333 (Left Hand) SETTLEMENT AT THE CLEARING-HOUSE. London, 1 88 To the Cashier of the Bank of England. Be pleased to Transfer from our Account the sum of and place it to the credit of the Account of the Clearing Bankers, and allow it to be drawn for by any of them (with the knowledge of either of the Inspectors, signified by his countersigning the drafts). L (Right Hand) SETTLEMENT AT THE CLEARING-HOUSE. Bank of England. ^^8 A Transfer for the sum of has this evening been made at the Bank, from the Account of Messrs to the account of the Clearing Bankers. £ For the Bank of England. This certificate has been seen by me ; Inspector. " When the ticket is ' white/ the clearer fills it up with the other form, leaves the little form with his sheet on the Inspector's desk, and then hurries over to the Bank of England with his ticket. The cashier at the bank, seeing that the ticket presented to him is signed by the manager, or other persons duly authorized, of whatever bank the clerk may purport to come from, signs the counterfoil, and retains the half, authorizing him to transfer a certain 334 CLEARING-HOUSES amount from the account of that bank to the account of the clearing bankers. The clearer on receiving the other half, signed by the cashier of the Bank of Eng- land, returns to the House to get the Inspector's sig- nature to the transfer, which he then takes to his own establishment. If the clearer be going to receive, he gets the Inspector's signature first, then goes to the Bank of England as before, where the same operation takes place. On regaining his ticket, or rather half of his ticket from the cashier, he returns to his own bank." CHAPTER XX JAPANESE CLEARING-HOUSES Location — Date of Formation— Hours of Clearing — Average Daily Clearings and Balances — Tokio Clearing-house — Volume of Clearings and Growth in Ten Years — Arrange- ment of Clearing-room — Abstract of Rules and Regulations of Tokio Clearing-house. In view of the recent ascendancy of Japan among the commercial and manufacturing nations of the world, an account of the clearing-houses there existing is of interest to bankers and business men everywhere. The following particulars were gathered from a representative of the Japanese Government, who visited this country a short time since, in quest of information concerning the con- duct of American financial and business institutions : There are four clearing-houses in Japan — namely, the Osaka Clearing-house, which dates back to December 1st of the twelfth year of Meiji (1879); the Tokio Clear- ing-house, which was established December ist of the twentieth year of the Meiji (1887) ; the Kobe Clearing- house, which was established July i, 1897, and the Kioto Clearing-house, which dates from December 15, 1897. The Osaka Clearing-house Association is comprised of twenty-two members, among which are thirteen head offices and nine branches. The Tokio Clearing-house 335 336 CLEARING-HOUSES Association has thirty-four members, embracing eigh- teen head offices and sixteen branches. The Kobe Clearing-house Association has ten members, of which four are head offices and six are branches. The Kioto Clearing-house Association has twelve members, of which seven are head offices and five are branches. Clearings in all of these are made once a day. The Tokio Clearing-house opens at 10.30 a.m., and closes at 1 1 A.M. The Osaki Clearing-house opens at i p.m. and closes at 1.30. Similar short periods of time are observed by the clearing-houses at Kioto and Kobe. Bills of exchange, promissory notes, certificates of de- posit, and checks are regarded as good clearing-matter and are allowed to pass through the clearing-houses as regular exchanges. The average daily clearings and bal- ances in the four clearing-houses named are as follows: Clearings, Balances, in Yens. in Yens. Osaka 560,000 120,000 Tokio 2,600,000 920,000 Kioto 210,000 54,000 Kobe 260,000 74,000 Balances are borrowed and loaned on interest by the bank officials. The central bank (the Bank of Japan) settles the balances by means of transfers between cur- rent accounts. Each bank in the clearing-houses has an account with the central bank. The central bank is located in Tokio, but has branches in various cities. The expenses of the clearing-houses are met as fol- lows: One-half of the total expenses is borne by the banks comprising the clearing-house in equal shares. JAPANESE CLEARING-HOUSES 337 The other half is paid by the banks in proportion to the amount of items presented by them at the clearing- house. Country banks are not allowed to clear their bills and checks through the clearing-houses, but banks in the cities are permitted to clear their bills through a member of the clearing-house. A clearing-house bank clearing items for a non-member is required to apprise all the members of the clearing-house of this fact. The Tokio Clearing-house, as before mentioned, dates back to 1879. ^^ the beginning the association was composed of twelve banks. The business methods of the clearing-house at that time were so imperfect that it was finally compelled to discontinue business. This oc- curred after an existence of about three years. There then followed a careful investigation of the various sys- tems employed in different parts of the world, which re- sulted in the formation of a new clearing-house in February, 1891. The new clearing-house was organized under the name of the Tokio Clearing-house and it commenced business in March of that year. It was modelled upon the lines of the London Clearing-house. The special features adopted are indicated by the fol- lowing rules : (i) The settlement of the daily balances will be ef- fected by transfers on the books of the Bank of Japan. (2) The Bank of Japan will clear its notes and checks as a special member. (3) Items received by clearing-house banks are to be passed through the clearing-house. Direct exchange between members of the clearing-house will not be al- 338 CLEARING-HOUSES lowed. For the violation of this rule, an appropriate penalty is provided. (4) Each member shall deposit as security with the clearing-house five per cent, government bonds, to the amount of ten thousand yens, face value. The members of the Tokio Clearing-house, at the time of its organization, were as follows : The First National Bank, the Third National Bank, the Fifteenth Nation- al Bank, the Twentieth National Bank, the Twenty- seventh National Bank, the One Hundred and Nine- teenth National Bank, the Mitsui Bank, the Yasuda Bank, Branch of the Thirteenth National Bank, Branch of the Thirty-second National Bank, and one other. In addition to this number, there was the Bank of Japan, which is a special member. In January, 1895, the Kawa- saki Bank and the Imperial Commercial Bank were ad- mitted to membership. In February of 1896, five ad- ditional banks joined the association — namely, the Tokai Bank, the Forty-first National Bank, the Seventy- seventh National Bank, the Seventy-eighth National Bank, and the One Hundred and Thirteenth National Bank. Since May, 1896, the Tokio Clearing-house has occupied a room in the new building erected by the Bank of Japan. The growth of the clearing-house business in Japan is shown by the following table, which gives in the first column the number of items, and in the second their amount for each year, from 1887 to October, 1897, in- clusive : JAPANESE CLEARING-HOUSES 339 Number of Amount, Year. Items. in Yens. 1887 " 1,984 1,232,185 1888 25,289 12,281,948 1889 36,524 19,559,400 1890 42,301 20,206,094 1891 59,427 67,595,422 1892 97,190 113,576,594 1893 134,505 148,018,871 1894 172,189 185,597,497 1895 223,123 289,102,424 1896 349,429 417,425,507 1897 (to October) 440,464,548 The arrangement of the banks in the clearing-room of the clearing-house is as follows: The desks are in two parallel rows, at some little distance apart. Between them, at one end and projecting outwardly, somewhat beyond the ends of the rows, are the desks of the man- ager and secretary, respectively. The first desk at the right of the manager is the Bank of Japan. Following in order down this row are the First National Bank, the Third National Bank, the Fifteenth National Bank, the Twentieth National Bank, the Twenty-seventh National Bank, the One Hundredth National Bank, the One Hun- dred and Nineteenth National Bank, and the One Hun- dred and Thirteenth National Bank. The row at the left of the manager has banks in the following order : Mitsui, Yesuda, Konoike, Thirty-second National Bank, Im- perial Commercial Bank, Kawanaki, Tokai, Forty-first National Bank, Seventy-seventh National Bank, and Seventy-eighth National Bank. This list includes only those banks which have been previously designated in this description as head offices. 340 CLEARING-HOUSES The following abstract of the rules and regulations of the Tokio Clearing-house will give a general idea of the organization and conduct of this institution. The other Japanese clearing-houses are largely modelled upon the same plan, and, of course, are subject to the same general laws: This clearing-house shall be named the Tokio Clear- ing-house, and it shall be located within the precincts of the Bank of Japan, Honriokae Cho (street), Niphon- bashi Ku (district). The object of this clearing-house is to exchange bills and checks of various descriptions, re- ceived by member-banks. Claims arising from the non-payment of bills and checks, or from the mistakes of clearing, shall be settled between the banks concerned, and the clearing-house shall not be responsible therefor. The rules for clearing are as follows: The clearing- house will open at 10.30 a.m. and close at 11 a.m. ex- actly. These hours are subject to change by the board. Only those bills and notes payable at member-banks can be cleared. Daily balances shall be settled by means of transfers in the current accounts of the various banks in the Bank of Japan. The settling clerk of each clearing- bank must list bills and checks, and endorse each of them. The settling clerk shall also prepare slips and lists, which must accompany the items brought to the clearing-house. The settling clerk of each bank, after the exchanges are made, shall fill out the debtor side of his list, strike a balance, and prepare a balance sheet, which he shall submit to the manager of the clearing-house. The man- JAPANESE CLEARING-HOUSES 341 ager of the clearing-house shall examine the balance sheets submitted by the settling clerks, and it shall be the duty of the secretary to enter all items in a book kept for that purpose. The settling clerks of the debtor banks shall prepare sheets showing the balances due from them, which shall be signed and sent to the Bank of Japan, which, in turn, shall give advices of the entry. These advices shall be sent to the manager of the clearing-house for his signature. Credit banks shall also make up slips showing the bal- ances due them, which slips, after being signed by the settling clerks, shall be sent to the manager of the clear- ing-house for his signature, after which they shall go to the Bank of Japan, which shall give advice of credit. The manager of the clearing-house shall make up his settlement sheets every day, after clearing, and send them to the Bank of Japan. When bills and checks sent through the clearing- house are dishonored, they shall be returned through the exchanges of the next day to the banks presenting them, from whom they shall receive the cash therefor. Noti- fication of dishonored items must be made before 3 o'clock of the day in which they are passed through the clearing-house. If the bank which presented the dishonored bills re- fuses to take them up, and if it fails to send the requisite sum of the Bank of Japan before 1.30 p.m., the credit bank shall advise the manager of the clearing-house, and thereupon he shall call upon the debtor bank to make the payment. If the debtor bank does not then make the payment, 342 CLEARING-HOUSES the manager of the clearing-house will make new settle^ ment sheets and will force the bank to send back all checks and bills of the previous day for return to the banks presenting them. If the items above referred to have been stamped '' Paid " or '' Entered," the bank must make out a slip, advising that they were not paid. If the bank does not fulfil this requirement, the man- ager of the clearing-house will then establish the fact of their non-payment by means of his books. The following regulations concerning clearing-banks are in force : Only banks having accounts with the Bank of Japan are eligible to membership. The Bank of Ja- pan, as a special member, shall send its settling clerk to the clearing-house. Each member shall deposit as se- curity, with the clearing-house. Government bonds bear- ing interest at the rate of five per cent, or more, to the amount of ten thousand yens, face value. The expenses of the clearing-house shall be paid by its members, im- mediately after receipt of advice from the committee. Members shall not without reason refuse bills and checks payable at clearing-banks in the course of their busi- ness. Whether a clearing-bank has bills or checks to bring into the clearing-house or not, it must send its settling clerk to the clearing-house. Banks desiring to become members of the clearing- house shall apply to the committee of the clearing-house, through an introduction of a clearing-bank. The com- mittee shall give notice of the application to the mem- bers, and they will proceed at the proper time to ballot in secret, a three-fourths vote being required to admit a new member. JAPANESE CLEARING-HOUSES 343 Before clearing for a non-member bank, a bank must give notice to the committee, which shall advise all the other members. The clearing-bank shall not be respon- sible for the bills of the bank for which it clears. Members desiring to retire from the clearing-house shall apply to the committee, whose duty it shall be to notify all the members, and if there is no objection, the application shall be granted. Until its resignation is ac- cepted, the bank shall not receive its security, and shall send its settling clerk to the clearing-house as usual. If a member refuses the payment in accordance with the provisions relating to dishonored bills, the commit- tee shall sell its security and settle its debts, in which case the committee shall expel the bank and advise all the members, and the members shall not receive checks and bills payable at that bank. When a member violates the rules of the clearing- house, or is deemed insolvent, or in danger of failing, the committee shall make an investigation, summoning be- fore it an of^cer of the bank. A special meeting of all the members shall be called, and with the consent of three-fourths of those present, the bank may be expelled from the clearing-house. The following are the regulations concerning meet- ings : Meetings are of two kinds : First, regular meet- ings; second, special meetings. Regular meetings shall be held twice a year, in January and July, at which meet- ings the committee shall make reports of the general afifairs of the clearing-house and of the expenditures for the preceding six months. Special meetings shall be held when the committee deems it necessary, or at the 344 CLEARING-HOUSES request of five or more members. The chairman of the committee shall preside at the meetings. In his ab- sence, one of the other members of the committee shall take his place. A quorum shall consist of a majority of the whole number. All questions, except those relating to the admission of new members, the expulsion of members, and amend- ments to the Constitution, shall be decided by majority vote. In case of a tie, the chairman shall have the de- ciding vote. The minutes of the meeting shall be kept and signed by the chairman. The following are the provisions relating to the clear- ing-house committee: The committee shall consist of three members and the term of of^ce shall be for one year. They shall be chosen from the managers and di- rectors of the clearing-banks and shall have the power to select their own chairman. They shall be eligible for re-election. The duties and powers of the committee are indicated in the following summary : (a) General business of the clearing-house; (b) Enforcement of the rules of the clear- ing-house; (c) Control of the manager; (d) Appointment, dismissal, and regulation of the salary of the manager, subject to the approval of the clearing-house banks; (e) Appointment and dismissal and regulation of the salary of the secretary; (f) Arbitration of disputes between members; (g) Calling special meetings. Of the fore- going, a, b, and c can be attended to by one member; d, e, f, and g require a two-thirds vote of the committee. The following are the regulations affecting the man- ager and secretary : The manager shall be appointed by JAPANESE CLEARING-HOUSES 345 the committee, subject to the approval of the meeting. The manager shall be controlled by the committee and shall have supervision of the secretary's work. He shall be responsible for the settlement of the clearings and the settling clerk shall be under his control and must obey his commands while in the clearing-house. The secre- tary, under supervision of the committee and manager, shall attend to the general affairs of the clearing-house. The following rules relate to expenditures: The re- port of the expenditures of the clearing-house shall be presented by the committee twice a year, at the regular meetings. The expenses of the clearing-house shall be met in the following manner : One-half shall be borne by all the members equally; the other half shall be appor- tioned between members, according to the amount of items presented by them at the clearing-house. To pro- vide a fund to meet expenses, members are required to deposit with the clearing-house a certain sum of money, stipulated by the committee. The following provision with respect to changes of Constitution and By-laws is made: The Constitution may be amended by a three-fourths vote, at a meeting of the members of the association, but, to be effective, re- quires the approval of the Bank of Japan. The following rules with regard to penalties are in force: Settling clerks who are late shall be fined thirty sens (fifteen cents). If a settling clerk is more than five minutes late he will be fined fifty sens (twenty-five cents), and, in addition to this, he will not be allowed to deliver his bills and checks to the other banks, but he will be obliged to receive those that are brought in by the 346 CLEARING-HOUSES other banks to him. Members shall not be absent with- out reason, under penalty of a fine of two yens (one dol- lar). If absent, the bills to be delivered to the bank can be presented direct for payment. If a settling clerk makes a mistake in his balance-sheet, submitted to the manager, he will be fined twenty sens, but if he finds his mistake five minutes before the closing of the settlement, he will be released from the fine. If he cannot find his mistake after the closing of the clear- ing, he will be fined twenty sens for each ten minutes. If there is a mistake in the slip, the clearing-house will collect thirty sens fine from the presenter of the sHp, and the provision regulating the lines of settling clerks who make a mistake in their balance-sheets submitted to the manager will stand void. If the payment of dishonored bills and checks is deferred, or if the paying in of the bal- ance to the Bank of Japan is deferred, two yens will be collected in each case. INDEX PAGE Action in cases of default, Canadian Clearing-houses 303 Administration in Canada, plan of 33 of Chicago Clearing-house 281 of Clearing-houses 28 of Clearing-house, Philadelphia 222 Admission and conduct of members. New York Clearing-house 148 Admission fee, Chicago Clearing-house 279 New York Clearing-house 148 Admission of members, St. Louis Clearing-house 286 Admissions, committee on 31, 32 New York Clearing-house, committee on 146 to membership, Boston 243 Adoption of constitution. New York Clearing-house 134 New York Clearing-house, opposition to 134 Advantage of manager's check 44 Agency, a central, the Clearing-houses 24 Agent, Canadian clearing 302 Aggregate of issues of loan certificates at New York 106 Agreement as to rates of exchange, Buffalo 14 to comply with rules and regulations regarding collections outside of New York 172 Amendment to Boston Clearing-house constitution 248 Amount of exchanges brought to the New York Clearing- house, by one bank, greatest 208 Amount of exchanges taken from New York Clearing-house, by one bank, greatest 208 Amount of payment, New Orleans, resolution limiting 114 Amounts paid in making settlements, tickets used by Boston banks for notifying manager of 234 Annual meeting 33 Chicago Clearing-house 282 Application for membership, Chicago Clearing-house 279 in Tokio Clearing-house 342 Philadelphia 222 Application to clear for another bank, New York Clearing- house 154 Application to New Orleans loan committee for certificates. ... 11 1 Arbitration committee 3^, 32 New York Clearing-house 146 Arithmometers, foreign department, Boston Clearing-house, Burrough's 258 Arrangement of banks in Tokio Clearing-house 339 Arrangement of furniture 47 347 348 INDEX PAGE Assessment for expenses, Boston 242 Philadelphia " 221 St. Louis Clearing-house 289 Assistance of members, mutual 12 Assistant manager, New York Clearing-house, William J. Gilpin, present 144 Assistant manager's rooms, New York Clearing-house, view in manager's and 143 Associated banks, Boston, statement of 241 New York Clearing-house, form of statement required of. . 164 of the city of New York, form of summary of weekly state- ment of the 163 of the city of New York, skeleton of the weekly statement of the 162 Atlanta, Ga., form of Clearing-house loan certificate used in. .. 119 in 1893, issue of loan certificates at 117 loan certificates, special features of 117 Attitude of banks toward loan certificates 83 Authorization of loan certificates by Philadelphia in 1873 91 Average condition, Philadelphia, statement of 218 Average daily clearings and balances, Japanese Clearing-houses 336 weekly return, Boston 240 Averages of Brooklyn non-member banks, form of statement of weekly 1 56 Back of check drawn by Woodward Brothers, fac-simile of 75 Balance 6 Balance from one' day's exchanges, New York Clearing-house, largest 208 New York Clearing-house, smallest 208 Balance paid by New York Clearing-house to one bank, largest 208 smallest 208 Balance paid to New York Clearing-house by one bank, smallest 208 by single institution, largest 208 Balance, receipt for ( Buffalo) 39, 40, 41 slips of Tokio credit banks 341 Balances, average rate on, at St. Joseph, Mo 13 Boston, borrowing and loaning 233 Boston, circulating notes in settlement of 229 Boston, settlement of 232 Canadian Clearing-houses, payment of 314 Chicago Clearing-house, settlement of 268 Chicago Clearing-house, trading. 270 Clearing-house certificates in liquidation of. New York.... 190 form of settling clerk's report to his bank of daily, New York , 189 Japanese Clearing-houses, average daily clearings and 336 Japanese Clearing-houses, borrowing and loaning 336 Japanese Clearing-houses, settlement of 336 London, form for entering credit 331 London, form for entering debit 331 London, sheet for entering 328 INDEX 349 PAGE Balances, methods of settlement of 36 paid in money for forty-six years, table showing, New York 205 paid September 30, 1899, debit, New York 194 payment of debit. New York 188 rate on bank at Sioux City, la 13 St. Louis, form for listing 293 Tokio Clearing-house, settlement of 340 record of money and certificates used in settlement of New York 194 report of, New York 184 responsibility of association for. New York 195 settlement of 25, 26, 2"; settlement of Clearing-house 35 that have been loaned, Chicago form of order used in trans- ferring 273 to clearings, ratio of 36 with interest, borrowing and loaning 42, 44 without interest, borrowing and loaning 42, 44 with money, settlements of 37 without money, settling 40 Baltimore clearing regulations 51 Baltimore, form of Clearing-house loan certificates used in 107 in 1873, issue of loan certificates at 94 in 1893, issue of loan certificates at 108 methods of delivery 54 rates of exchange, 1897 .' 15 Bank examiners, special 25 Banking and currency systems of the Dominion of Canada 297 Bank, New York Clearing-house, application to clear for another 154 New York Clearing-house, consent to clear for another... 155 New York Clearing-house, resolution authorizing ex- changes through a member 153 Bank statements, form used at New York Clearing-house in tabulating national 160 form used at New York Clearing-house in tabulating State. 161 Banks and currency of the several United States, Albert Gal- latin, suggestions on 130 Banks, belonging to Canadian Clearing-houses, number of 302 Chicago Clearing-house, non-member 276 foreign department Boston Clearing-house, resolution adopted by foreign 251 form of statement of weekly averages of Brooklyn non- member 156 in Tokio Clearing-house, arrangement of 339 New York Clearing-house, form of statement required of associated 164 . New York clearing-house, skeleton of quarterly statement of national 165 New York Clearing-house, skeleton of weekly statement of non-member 167 of the city of New York, form of summary of weekly state- ment of the associated 163 350 INDEX PAGE Banks, of the city of New York, skeleton of the quarterly statement of the condition of the State i66 of the city of New York, skeleton of the weekly statement of the associated 162 stationery used by New York 177 toward loan certificates, attitude of ' 83 Bill 5 of exchange 5 Birmingham, Ala., clearing regulations 51 form of Clearing-house loan certificates used in 121 currency system 1 18 in 1893, issue of loan certificates at 117 Boards, duties of Canadian Clearing-house 301 of directors of New Orleans associated banks, resolution passed by 1 1 1 Book-keeping employed in foreign department, Boston Clear- ing-house 260 Bond, manager's 29 Borrowing and loaning balances, Boston 233 J apanese Clearing-houses 336 with interest 42, 44 without interest 42, 44 Boston association, meetings of 244 Boston Clearing-house 228 book-keeping employed in foreign department 260 constitution, amendment to 248 exchange ticket, foreign department 253 fines, foreign department 254 foreign department 22, 246 foreign slip and foreign check ticket 255 form of letter of transmission to correspondents, foreign department 259 form of settling clerk's statement, foreign department 261 forms used by foreign department 256 hours for clearing, foreign department 251 ledger employed by foreign department 260 letter-form used in transmitting checks, foreign depart- ment 258 location of / 231 organization of foreign department of 246 receipt, foreign department 257 regulations for collection of out-of-town checks, foreign department 251 report of committee on foreign department 246 resolution adopted by collecting banks, foreign department 251 rules and regulations governing foreign department 248 settling clerk's statement, foreign department 258 Boston, form of Clearing-house loan certificate used in 105 in 1873, issue of loan certificates by Qi in 1893, issue of loan certificates at 106 in 1895, issue of loan certificates at 122 Brooklyn non-member banks, form of statement of weekly averages of 156 INDEX 35, PAGE Buffalo in 1893, issue of loan certificates at 1 14 Buffalo, N. Y., agreement on rates of exchange 14 Building company, New York Clearing-house 137 Building fund, New York Clearing-house 136 Burrough's arithmometers, foreign department, Boston Clear- ing-house 258 By-laws, Tokio Clearing-house, provision respecting changes of constitution and 344 Calculating interest on certificates, methods of 123 Camp, second manager New York Clearing-house, William A. 142 Canada, banking and currency systems of the Dominion of 297 Clearing-houses in 299 plan of administration in 33 Canadian clearing agent 302 Canadian Clearing-house boards, duties of 301 managers' duties 302 Canadian Clearing-houses 297 action in cases of default 303 clearing of non-members 304 clearing matter 317 defaulting members 316 expulsion of members 303 government of 301 medium of settlement 316 number of banks belonging to 302 objects of 300 payment of balances 314 routine of exchanges 304 statements of condition 318 single instance of failure 303 withdrawals of members 303 Canadian settlements yj Carrying checks to Clearing-house, method of 53 Cashier of Clearing-house, Fall River, Mass 57 Cashiers of New Orleans associated banks, communication ad- dressed to 1 10 Cash settlement of balances 26, 27 settlements, Chicago Clearing-house 272 Centre, money 6 Cedar street, New York Clearing-house, view down 141 property, purchase of 138 Central agency, the Clearing-houses a 24 Certificate of deposit used by Richmond, Va., associated banks 43 Certificate used by New York Clearing-house in 1873, form of loan 89 used in Philadelphia, form of Clearing-house loan 93 Certificates, at Baltimore in 1873, issue of loan 94 at Birmingham in 1893. issue of loan 117 at Louisville, Ky., in 1891, issue of loan 102 at New Orleans in 1879, issue of loan 97 at New York in 1884, issue of loan 97 at New York in 1893, issue of loan 104 at Philadelphia in 1890, issue of loan 102 352 INDEX PAGE Certificates, at Pittsburg in 1893, issue of loan 1 16 at St. Louis in 1873, issue of loan 95 attitude of banks toward loan 83 Boston, loan 231 by Boston in 1873, issue of loan .........!. ..... 91 Certificates by New York association, first issue of loan '. 90 second issue of loan 90 Certificates by Philadelphia in 1873, authorization of loan .. 91 Certificates, Chicago, Clearing-house loan 280 Clearing-house, banks of the South. , . 120 Clearing-house loan 42, 45, 79 J°^" •/•••• v; '-42' 44 denominations of loan 82 description of Clearing-house loan 79, 80 first issue of Clearing-house loan 84 fourth issue of Clearing-house loan 88 in liquidation of balances, Clearing-house, New York 190 interest rates on loan 82 in 1873, issue of loan 88 in 1890, issue of loan 99 issued in 1890, provision for retirement of loan 99 issue of Clearing-house loan 22 legal tender 42, 45 origin of Clearing-house loan 80 resolution adopted by New York association in 1890 with regard to 98 resolution passed at Philadelphia in 1890 with regard to loi retirement of loan 82 second issue of clearing-house loan 87 St. Louis Clearing-house, loan 285 St. Louis, manager's 292 third issue of Clearing-house loan 87 value of Clearing-house loan 81 Charges, collection, St. Louis, Mo., system of 17 Denver, Col., collection 19 Rochester, N. Y., schedule of collection 15 St. Louis, Mo., system of collection 17 Toledo, O., rate of 16 Charges on collections, St. Joseph, Mo 20 West Superior, Wis 19 Chattanooga, Tenn., in 1893, issue of loan certificates at 120 Check 6 advantages of manager's 44 Check drawn by Woodward Brothers, fac-simile of back of 75 journey of 74 Check, journey of a country 68 local 9 personal 9 the journey of which is shown on map, fac-simile of 73 ticket, Boston Clearing-house, foreign slip and foreign 255 Check's itinerary, map showing 77 Checks and drafts, extensive use of 62 Checks, Chicago Clearing-house, exchange of 268 INDEX 353 PAGE Checks, clearing country 62 country 24 foreign department Boston Clearing-house, letter-form used in transmitting 258 foreign department Boston Clearing-house, regulations for collection of out-of-town 251 liability for manager's 42 manager's 42 method of carrying to Clearing-house 53 method of collecting country 68 objection to country 64 remedy for country 64 Chester, Pa., clearing regulations 51 Chicago, description of clearing-room 265 form of order used in transferring balances that have been loaned 273 forms of reports used in trading balances 271 Chicago Clearing-house, administration of 281 admission fee 279 annual meeting 282 application for membership 279 cash settlements 272 date of formation of 263 exchange of checks 268 expenses of 278 expulsion of members 280 failure of members of 264 fines enforced by 278 hours of exchanges 265 incorporation of 264 kinds of money employed in settling balances 268 loan certificates 280 loans to members 280 location of 265 Chicago Clearing-house manager for balance due, form of or- der on 275 order on 274 Chicago Clearing-house, method of settlement 268 non-member banks 276 original membership of 263 present membership of 263 records of exchanges 281 requirements for membership in 264 restricted endorsements 278 restrictions of membership 279 routine of exchange 266 settlements of amounts of orders 274 settlement of balances 268 statement of condition of members 2TJ the 263 trading balances 270 volume of clearings 280 withdrawals of members 279 354 INDEX PAGE Cincinnati association with regard to loan certificates, resolu- tion adopted by 95, 96 Cincinnati, fines for errors 57 form of Clearing-house loan certificate used in. 113 in 1893, issue of loan certificates at 114 method of delivery 54 Cincinnati clearing regulations 51 Circulating notes in settlement of balances, Boston 229 Claims, Tokio Clearing-house, settlement of 340 Classes of Clearing-houses 2 Clear, to 4 Clearance 4 Clearances 5 Clear for another bank. New York Clearing-house, applica- tion to 154 New York Clearing-house, consent to 155 Clearing , 4 agent, Canadian 302 at Fall River, Mass 58 at New Bedford, Mass 58 banks, rules concerning Tokio 342 country checks 62 foreign department, Boston Clearing-house, hours for 251 Clearing for non-members, Japanese Clearing-houses ^yj New York Clearing-house 150 Tokio Clearing-house 343 Clearing for out-of-town correspondents, Fargo, S. Dak 51 for outside banks and trust companies, Boston 238 for outside institutions, St. Louis Clearing-house, liability of members 287 Clearing-house, administration of Chicago 281 admission fee, Chicago 279 annual meeting, Chicago 282 application for membership in Tokio 342 application for membership, Chicago 279 arrangement of banks in Tokio 339 association of the banks of Philadelphia, The 209 Clearing-house association, Kioto 336 Kobe 336 Osaka 335 Sedalia, Mo 65 Tokio 335 Clearing-house balances, settlement of 35 Clearing-house, banks eligible to membership in Tokio 342 boards, duties of Canadian 301 building company. New York 137 business, illustration of growth of Japanese 339 building fund. New York 136 book-keeping employed in foreign department, Boston.... 260 Boston 228 Canadian 297 cash settlements, Chicago 272 certificates, banks of the southeast 120 INDEX 355 PAGE Clearing-house, certificates, fine for transfer of. New York 190 certificates in liquidation of balances, New York 190 certificates. New Orleans, ratification of issue of 112 clearing matter, Tokio 340 clearing-room of New York 49 clearing for non-members, Tokio 343 committee 30, 31 committee, deposit of collateral with Philadelphia 219 committee, duties and powers of Tokio 344 committee, New York clearing-house 144 committee, provisions relating to Tokio 344 constitution, amendment to Boston 248 daily routine of the New York 175 date of formation of Chicago 263 defects of original system. New York 129 defined 4 definition of i dishonored items, Tokio 341 due bill, Philadelphia 213 duties of settling clerk, Tokio 340 exchange of checks, Chicago 268 exchanges 47 exchange ticket, foreign department Boston 253 expenses of Chicago 278 expenses of Tokio 342 expulsion of members, Chicago 280 members, expulsion of Tokio 343 fac-simile of first delivery voucher, Toronto 307 failure of members of Chicago 264 Fall River, Mass., cashier of 57 fines enforced by Chicago 278 fines, foreign department, Boston 254 foreign department, Boston 246 foreign slip and foreign check ticket, Boston 255 form of delivery statement, Toronto 305 form of letter of transmission to correspondents, foreign department, Boston 259 form of proof used in Toronto 311 form of settling clerk's statement, foreign department, Boston 261 forms used by foreign department, Boston 256 gold depository, New York 194 hours for clearing, foreign department, Boston 251 hours of clearing, Tokio 340 hours of exchanges, Chicago - 265 incorporation of Chicago 264 kinds of meetings, Tokio 343 kinds of money employed in settling balances, Chicago 268 ledger employed by foreign department, Boston 260 letter-form used in transmitting checks, foreign department, Boston 258 location of 47 location of Boston 231 356 INDEX PAGE Clearing-house, location of Chicago 265 Clearing-house loan certificates 42, 45, 70 Chicago 280 definition of 80 description of 79 first issue of 84 fourth issue of 88 issue of 22 origin of 80 second issue of 87 third issue of 87 used by New York Clearing-house in 1873, form of 89 used in Atlanta, Ga., form of 119 used in Baltimore, form of 107 used in Birmingham, Ala., form of 121 used in Boston, form of 105 used in Cincinnati, form of 113 used in Detroit, form of 115 used in New Orleans, form of 109 used in Philadelphia, form of 93 value of 81 Clearing-house, loans to members, Chicago 280 London 321 Clearing-house manager for balance due, order on Chicago. .. . 274 form of order on Chicago 275 Clearing-house managers' duties, Canadian 302 Clearing-house, manager's settlement sheets, Tokio 341 members' deposit with Tokio 342 members of Tokio 338 method of settlement, Chicago 268 national 65 New York 127 non-member banks, Chicago 276 object of Tokio 340 officers of a 28 organization of foreign department of Boston 246 original location of New York 134 original membership of Chicago 263 origin of New York 127 Philadelphia, administration of 222 present membership of Chicago 263 primary object of a 11 provision respecting changes of constitution and by-laws, Tokio 345 receipt, foreign department, Boston 257 records of exchanges, Chicago 281 records of the New York I73 refusal to pay dishonored bills, Tokio 343 regulations for collection of out-of-town checks, foreign department, Boston 251 reorganization of Tokio 337 report of committee on foreign department, Boston 246 requirements for membership in Chicago 264 INDEX - c^,,,o^, PAGE Clearing-house resolution adopted by collecting banks, foreign department, Boston 251 restricted endorsements, Chicago 278 restrictions of membership, Chicago 279 retirement of members, Tokio 343 routine of exchange, Chicago 266 rules and regulations governing foreign department, Boston 248 rules and regulations of Tokio 340 rules for clearing, Tokio 340 rules of Tokio ^^y rules regarding penalties, Tokio 345 rules relating to expenditures, Tokio 345 rules relating to manager and secretary, Tokio 344 St. Louis 285 St. Louis, operations of 289 second location of New York 135 settlement of balances, Chicago 268 settlement of balances, Tokio 340 settlement of claims, Tokio 340 settlements of amounts of orders, Chicago 274 settling clerk's statement, foreign department, Boston 258 shares, New York 200 special functions of a 11 statement of condition of members, Chicago 277 system, possible developments of the 23 terms 3 the Chicago 263 third location of New York 137 trading balances, Chicago 270 view down Cedar street, New York 141 view of New York 139 volume of clearings, Chicago 280 withdrawals of members, Chicago 279 Clearing-houses, action in cases of default, Canadian 303 administration of 28 average daily balances and clearings, Japanese 336 borrowing and loaning balances, Japanese 336 classes of 2 clearing of non-members, Canadian 304 clearing for non-members, Japanese 337 clearing matter, Canadian 3^7 clearing matter, Japanese 33^ credit voucher, Toronto 308 debit vouchers, Toronto 3io> 3ii defaulting members, Canadian 316 examination of items, Canadian 310 expenses of Japanese 33^ expulsion of members, Canadian 303 fac-simile of second delivery voucher, Toronto 309 functions of i government of Canadian 30i hours of clearing, Japanese 33o in Canada ^99 358 INDEX PAGE Clearing-houses, Japanese 335 location of Japane-se 335 number of banks belonging to Canadian 302 number of clearings, Japanese 336 number of Japanese 335 objects of Canadian 300 payment of balances, Canadian 314 routine of exchanges, Canadian 304 manager's settling sheet, Toronto 306 medium of settlement, Canadian 316 second delivery voucher, Toronto 306 settlement of balances, Japanese 336 single instance of failure, Canadian 303 statements of condition, Canadian 318 treatment of notes, Canadian 317 withdrawals of members, Canadian 303 Clearing, Japanese Clearing-houses, hours of 336 Clearing matter 8 Canadian Clearing-houses 317 Japanese Clearing-houses 336 New York 197 rules regulating 50 Tokio Clearing-house 340 Clearing of non-members, Canadian Clearing-houses 304 Clearing regulations, Baltimore, Md 51 Birmingham, Ala 51 Chester, Pa 51 Cincinnati, 51 Dayton, 51 Denver, Colo 51 Des Moines, la 51 Fargo, So. Dak 51 Holyoke, Mass 51 Los Angeles, Cal 51 Lowell, Mass 51 New Haven, Conn 51 New Orleans, La 52 . Rockford, 111 52 St. Paul, Minn 52 Savannah, Ga 52 Scranton, Pa 52 Springfield, Mass 51 Springfield, O. 51 Toledo, 51 Topeka, Kan 51 Waco. Tex 52 Washington, D. C 52 Worcester, Mass 51 Youngstown, 52 Clearing-room, Chicago, description of 265 description of ; • • • : '75 New York Clearing-house, view in 181 of New York Clearing-house 49 INDEX 359 PAGE Clearing-room, St. Louis Clearing-house 289 Clearing system for Long Island banks 66 Clearing, Tokio Clearing-house, hours of 340 Clearings 4 a day, two 57 and balances, Japanese Clearing-houses, average daily 336 Chicago Clearing-house, volume of 280 for forty-six years, table showing New York 203 Japanese Clearing-houses, number of 336 ratio of balances to clearings 36 St. Louis Clearing-house, manager's report of 295 St. Louis Clearing-house, proper matter for 294 Clerk, delivery. New York 176 settling. New York 176 Clerks, messengers and settling 53 roll call of West Superior, Wis 54 Coin certificates 42, 44 Collateral with Philadelphia Clearing-house committee, de- posit of 219 Collect, to 7 Collecting banks, foreign department, Boston Clearing-house, resolution adopted by 251 Collecting country checks, method of ; 68 Collecting out-of-town items, New York 22 Collection charges, Denver, Colo 19 Rochester, N. Y., schedule of 15 St. Louis, Mo., system of 17 Collection of out-of-town checks, foreign department, Boston Clearing-house, regulations for 251 Collection, Topeka, Kan., rates of 17 Collections 7 at Detroit, method of handling 59 New York Clearing-house, rules and regulations regard- ing outside 168 outside of New York, agreement to comply with rules and regulations regarding 172 outside the city of New York 168 St. Joseph, Mo., charges on 20 West Superior, Wis., charges on 19 Colored slips, Cincinnati 55 Committee, arbitration 31, 32 Clearing-house 30, 31 conference ; 31 duties and powers of Tokio Clearing-house 344 duty of loan 82 exchange 3i» 32 loan ,••••; 3i , New York Clearing-house, arbitration 146 New York Clearing-house, Clearing-house 144 New York Clearing-house, conference 145 New York Clearing-house, nominating 146 nominating 3i» 32 Committee on admissions 3i> 32 36o INDEX PAGE Committee on admissions, New York Clearing-house 146 Committee on foreign department, Boston Clearing-house, re- port of 246 Committee, provisions relating to Tokio Clearing-house 344 Committees, Boston, election of officers and 244 loan 81 of New York Clearing-house 144 St. Louis Clearing-house, duties of officers and 288 Communication addressed to cashiers of New Orleans associ- ated banks no Comparison of Philadelphia weekly statement with Boston and New York statements 216 Condition, Canadian Clearing-houses, statements of 318 of members, Chicago Clearing-house, statement of 277 of the State banks of the city of New York, skeleton of the quarterly statement of the 166 St. Louis Clearing-house, statement of 288 Conduct of members, New York Clearing-house, admission and 148 Conducting the exchanges, method of 54 Conference committee 31 New York Clearing-house 145 Consent to clear for another bank. New York Clearing-house. . 155 Constitution, amendment to Boston Clearing-house 248 and by-laws, Tokio Clearing-house, provision respecting changes of 345 drafted by George Curtis, New York Clearing-house 134 New York Clearing-house, adoption of 134 New York Clearing-house, opposition to adoption of 134 New York Clearing-house, provisions of 140 Correspondents, Fargo, So. Dak., clearing for out-of-town 51 foreign department, Boston Clearing-house, form of letter of transmission to 259 Country check, journey of a 68 Country checks 24 clearing 62 method of collecting 68 objection to 64 remedy for 64 Courts regarding loan certificates, decision of Pennsylvania. . . . 126 Credit balances, London, form for entering 331 Credit banks, balance slips of Tokio 341 Credit ticket, form of first or credit, New York 178 Credit voucher, Toronto Clearing-houses 308 used at Toronto, fac-simile of 313 Criticism of loan certificates 125 Currency by express, shipping 24 Currency, depositories for 27 of the several United States, Albert Gallatin, suggestions on banks and 130 system, Birmingham 118 systems of the Dominion of Canada, banking and 297 Curtis, George, New York Clearing-house, constitution drafted by 134 INDEX 361 PAGE Daily balances, form of settling clerk's report to his bank of, New York 189 Daily clearings and balances, Japanese Clearing-houses, average 336 Daily exchanges, hour of 48, 50 Daily routine of the New York Clearing-house 175 Daily statement, Philadelphia 217 Date of formation of Chicago Clearing-house 263 Date of organization, Boston 228 of Philadelphia Clearing-house association 209 Day, two clearings a 57 Dayton, O., clearing regulations 51 Debit balances, London, form for entering 331 paid September 30, 1899, New York 194 payment of. New York 188 Debit list, St. Louis Clearing-house, fac-simile of 291 Debit vouchers, Toronto Clearing-house 310 Debit voucher used at Toronto, fac-simile of 315 Decision of Pennsylvania courts regarding loan certificates 126 Default, Canadian Clearing-houses, action in cases of 303 Defaulting members, Canadian Clearing-houses 316 treatment of. New York 194 Defects of original system. New York Clearing-house 129 Deficiencies in contents of sealed bags or packages, reclama- tions for errors, New York 196 Definition of a Clearing-house i of Clearing-house loan certificates 80 Delivery clerk, New York 176 Delivery clerk's receipts, form of, New York 182 New York I79 Delivery statement, employed at Toronto, form of 305 Toronto Clearing-houses, form of 305 Delivery voucher, Toronto Clearing-houses, fac-simile oi first. 307 Toronto Clearing-houses, fac-simile of second 309 Toronto Clearing-houses, second 306 Delivering items, methods of 55 Denominations of loan certificates 82 Denver, Colo., clearing regulations 51 collection charges IQ transfers by telegraph ; 21 Department Boston Clearing-house, exchange ticket, foreign.. 253 foreign 246 hours for clearing, foreign ; 251 regulations for collection of out-of-town checks, foreign.. 251 report of committee on foreign 246 resolution adopted by collecting banks, foreign 251 rules and regulations governing foreign 248 organization of foreign 246 Deposit certificate used by Richmond, Va., associated banks. .. 43 Deposit of collateral with Philadelphia Clearing-house com- mittee ; 219 Deposit with Tokio Clearing-house, members' 342 Deposits, fixing uniform rates of interest on 13 uniform rates of interest on 24 362 INDEX PAGE Depositories for currency 27 Depository, Clearing-house gold, New York 194 gold 42, 45 Description of Clearing-house loan certificates 79 Description of Clearing-room, Chicago 265 Description of New York Clearing-room 175 Des Moines, la., clearing regulations 51 Detroit, form of Clearing-house loan certificates used in 115 in 1893, issue of loan certificates at 116 method of handling collections at 59 Developments of the Clearing-house system, possible 23 Dishonored bills, Tokio Clearing-house, refusal to pay 343 Dishonored items, Tokio Clearing-house 341 Disposition of interest charged on loan certificates 125 Dominion of Canada, banking and currency systems of the 297 Donation of fines, Philadelphia 221 Draft 6 settling by 42, 45 Drafts, extensive use of checks and 62 foreign 46 Due-bill, Philadelphia Clearing-house 213 runners' exchange, Philadelphia 211 Duties and powers of Tokio Clearing-house committee 344 Duties of Canadian Clearing-house boards 301 Duties of officers, New York Clearing-house 140 Duties, Canadian Clearing-house managers' 302 of manager 30 of manager, Boston 245 of officers and committees, St. Louis Clearing-house 288 of president 28 of settling clerk, Tokio Clearing-house 340 of treasurer : 29 of vice-president ; 29 Duty of loan committee 82 Election of officers and committees, Boston 244 Endorsements, Chicago Clearing-house, restricted 278 Entering balances, London, sheet for 328 Error in clerks' sheets, method of finding, New York 188 Errors, fines for 56 fines for, Cincinnati 57 fines for, Louisville, Ky 57 or deficiencies in contents of sealed bags or packages, reclamations for, New York 196 Examination of items, Canadian Clearing-houses 310 Examination of securities in the custody of Philadelphia Clear- ing-house committee 220 Examiners, special bank 25 Exchange 5 bill of 5 charges for, Denver, Colo 19 charges on collections, St. Joseph, Mo 21 charges on collections. West Superior, Wis 19 Chicago Clearing-house, routine of 266 INDEX 363 PAGE Exchange, collection charges, New York 22 committee 31, 32 fixing uniform rates of 14 Houston, Tex., rate of 15 of checks, Chicago Clearing-house 268 of items, results of 35 Philadelphia runners' 210 Philadelphia, William H. Rhawn, proposed introduction of second 210 rates of, Buffalo agreement 14 rates of, fixing uniform loi rates of, in Baltimore, 1897 15 routine of. New York 179 system of collection charges, St, Louis, Mo 17 ticket, foreign department, Boston Clearing-house 253 Topeka, Kan., rates of 17 Toledo, O., rate of charges 16 Exchange slip, form of. New York 177 New York 176 Exchanges brought to the New York Clearing-house by one bank, greatest amount of 208 Exchanges, Canadian Clearing-houses, routine of 304 Chicago Clearing-house, hours of 265 Chicago Clearing-house, records of 281 Clearing-house 47 hour of daily 48, 50 method of conducting the 54 New York Clearing-house, hour of 175 taken from the New York Clearing-house by one bank, greatest amount of 208 through a member bank, New York Clearing-house, resolu- tion authorizing I53 time allowed for making, New York 184 time required to make 56 Expenditures, Tokio Clearing-house, rules relating to 345 Expense of printing, St. Louis Clearing-house 288 Expenses, Boston, assessment for 242 of Chicago Clearing-house 278 of Japanese Clearing-houses 33^ of printing. New York I99 of Tokio Clearing-house 342 Philadelphia, assessment for 221 pro rating, of New York 'pS St. Louis Clearing-house, assessment for 289 Express, shipping currency by ; • • • 24 Expulsion and suspension of members. New York Clearing- house 149 Expulsion of members, Boston 243 Canadian Clearing-houses 3^^ Chicago Clearing-house 280 St. Louis Clearing-house 286 Expulsion of Tokio Clearing-house members 343 Extending of loans to the government 12 Extensive use of checks and drafts 02 364 INDEX PAGE Fac-simile of back of check drawn by Woodward Brothers... . 75 Fac-simile of check, the journey of which is shown on map ^2) Fac-simile of credit voucher used at Toronto 313 Fac-simile of debit list, St. Louis Clearing-house 291 Fac-simile of debit voucher used at Toronto 315 Fac-simile of first delivery voucher, Toronto Clearing-houses. 307 Fac-simile of second delivery voucher, Toronto Clearing-houses 309 Fac-simile of small ticket deposited by messenger with settling clerk. New York 179 Failure, Canadian Clearing-houses, single instance of 303 of Keystone national bank 225 of members of Chicago Clearing-house 264 Failures of members, Philadelphia 224 Fall River, Mass., cashier of Clearing-house 57 clearing at 58 Fargo, So. Dak., clearing for out-of-town correspondents 51 clearing regulations 51 Features of Atlanta loan certificates, special 117 Fee, Chicago Clearing-house, admission 279 New York Clearing-house, admission 148 Fines enforced by Chicago Clearing-house 278 Fines for errors 56 Fines for tardiness 54 Milwaukee, Wis 54 Fine for transfer of Clearing-house certificates, New York 190 Fines, foreign department, Boston Clearing-house 254 Philadelphia, donation of 221 St. Louis Clearing-house 289 scale of. New York 201 First delivery voucher, Toronto Clearing-house, fac-simile of. . 307 First issue of Clearing-house loan certificates 84 First issue of loan certificates by New York association 90 First or credit ticket, form of, New York 178 First ticket, New York 176 Fixing uniform rates of exchange 14 Fixing uniform rates of interest on deposits 13 Foreign check ticket, Boston Clearing-house, foreign slip and. 255 Foreign department Boston Clearing-house 22, 246 book-keeping employed in 260 exchange ticket 253 fines 254 form of letter of transmission to correspondents 259 form of settling clerk's statement 261 forms used by 256 hours for clearing 251 ledger employed by 260 letter-form used in transmitting checks 258 organization of 246 receipt 257 regulations for collection of out-of-town checks 251 report of committee on 246 resolution adopted by collecting banks 251 rules and regulations governing 248 settling clerk's statement 258 INDEX 365 PAGE Foreign drafts 45 Foreign slip and foreign check ticket, Boston Clearing-house.! 255 Form for entering credit balances, London 331 Form for entering debit balances, London 331 Form for listing balances, St. Louis 293 Form of Clearing-house loan certificate, used by New York Clearing-house in 1873 gg used in Atlanta, Ga up used in Baltimore 107 used in Birmingham, Ala 121 used in Boston 105 used in Cincinnati 113 used in Detroit 115 used in New Orleans 109 used in Philadelphia 93 Form of delivery clerk's receipts, New York 182 Form of delivery statement employed at Toronto 305 Form of delivery statement, Toronto Clearing-houses 305 Form of exchange slip, New York 177 Form of first or credit ticket, New York 178 Form of gold certificate, back. New York 193 face, New York 192 Form of letter of transmission to correspondents, foreign de- partment, Boston Clearing-house 259 Form of order on Chicago Clearing-house manager for balance due 275 Form of order used in transferring balances that have been loaned, Chicago 273 Form of proof clerk's sheet. New York 187 Form of proof used in Toronto Clearing-house 311 Form of second ticket, New York 185 Form of settling clerk's report to his bank of daily balances, New York 189 Form of settling clerk's statement, foreign department, Boston Clearing-house 261 New York 183 Form of statement of weekly averages of Brooklyn non-member banks 156 Form of statement required by the New York Clearing-house association of trust companies 159 Form of statement required of associated banks. New York Clearing-house 164 Form of summary of weekly statement of the associated banks of the city of New York • 163 Form used at New York Clearing-house, in tabulating national bank statements 160 in tabulating State bank statements 161 Formation of Chicago Clearing-house, date of 263 Forms of reports used in trading balances, Chicago 271 Forms used by foreign department. Boston Clearing-house 256 Fourth issue of Clearing-house loan certificates 88 Functions of a Clearing-house, special ii Functions of Clearing-houses I 366 INDEX PACE Fund, Boston, trust 238 New York Clearing-house building 136 Furniture, arrangement of 47 Gallatin, Albert, suggestions on banks and currency of the sev- eral United States 130 Gallery, New York Clearing-house, manager's 175 Gilpin, William J., present assistant manager New York Clear- ing-house 144 Gold certificate, back, form of, New York 193 face, form of, New York 192 Gold depository 42, 45 Clearing-house, New York 194 Government, extending of loans to the 12 of Canadian Clearing-houses 301 Greatest amount of exchanges brought to the New York Clear- ing-house by one bank 208 Greatest amount of exchanges taken from New York Clearing- house by one bank 208 Green ticket for receipts, London 332 Growth of Japanese Clearing-house business, illustration of . . . . 339 Guarantee of indorsements 53 Handling collections at Detroit, method of 59 Holyoke, Mass., clearing regulations 51 Hour of daily exchanges 48, 50 Hour of exchanges, New York Clearing-house 175 Hours for clearing, foreign department, Boston Clearing-house 251 Hours of exchanges, Chicago Clearing-house 265 Hours of clearing, Japanese Clearing-houses 336 Tokio Clearing-house 340 Houston, Tex., rate of exchange 16 Incorporation of Chicago Clearing-house 264 Indorsements, guarantee of 53 restricted 52 restrictive or qualified, New York 197 Institutions clearing through St. Louis Clearing-house associa- tion, outside 287 Interest, borrowing and loaning balances without 42, 44 borrowing and loaning balances with 42, 44 charged on loan certificates, disposition of 125 on certificates, methods of calculating 123 rates on loan certificates 82 Interest on deposits, fixing uniform rates of 13 uniform rates of 24 Introduction of New York methods in London Clearing-house 323 Issue of Clearing-house loan certificates 22 first 84 second 87 third 87 fourth 88 Issue of Clearing-house certificates, New Orleans, ratification of 112 INDEX 367 PAGE Issue of loan certificates, in 1873 88 in 1890 gg at Atlanta in 1893 , 117 at Baltimore in 1873 94 at Baltimore in 1893 108 at Birmingham in 1893 117 at Boston in 1893 106 at Boston in 1895 122 at Buffalo in 1893 114 at Chattanooga, Tenn., in 1893 120 at Cincinnati in 1893 114 at Detroit in 1893 116 at Louisville, Ky., in 1891 102 at New Orleans in 1879 97 at New Orleans in 1896 122 at New York in 1884 97 at New York in 1893 104 at Philadelphia in 1890 102 at Philadelphia in 1893 108 at Pittsburg in 1893 116 at St. Louis in 1873 95 by Boston in 1873 91 by New York association, first 90 by New York association, second 90 New Orleans, protection against loss from 112 Issues of loan certificates, at New York, aggregate of 106 Item 8 Items, Canadian Clearing-houses, examination of 310 methods of delivering 55 results of exchange of 35 Tokio Clearing-house, dishonored 341 Itinerary, map showing check's J7 Japanese Clearing-house business, illustration of growth of 339 Japanese Clearing-houses 335 average daily balances and clearings 2)Z^ borrowing and loaning balances 336 clearing for non-members ZZl clearing matter 336 expenses of ZZ^ hours of clearing ZZ^ location of 335 number of 335 number of clearings 336 settlement of balances Z^ Journey of a country check 68 Journey of check drawn by Woodward Brothers 74 Keystone national bank, failure of ; 225 Kinds of money employed in settling balances, Chicago Clear- ing-house 268 Kioto Clearing-house association 336 Kobe Clearing-house association 336 368 INDEX PAGE Labelled packages, money in 38 Largest balance from one day's exchanges, New York Clearing- house 208 Largest balance paid by New York Clearing-house to one bank 208 Largest balance paid to New York Clearing-house by single in- stitution 208 Largest transactions for one day, New York Clearing-house... 207 Ledger employed by foreign department, Boston Clearing- house 260 Legal tender certificates 42, 45 Letter-form used in transmitting checks, foreign department, Boston Clearing-house 258 Letter of transmission to correspondents, foreign department, Boston Clearing-house, form of 259 Liability for manager's checks 42 Liability of members clearing for outside institutions, St. Louis Clearing-house 287 Limiting amount of payment, New Orleans, resolution 114 Listing balances, St. Louis, form for 293 Liquidation of balances, Clearing-house certificates in. New York 190 List, St. Louis, fac-simile of debit 291 Loan certificate, used by New York Clearing-house in 1873, form of 89 used in Atlanta, Ga., form of Clearing-house 119 used in Boston, form of Clearing-house 105 used in Cincinnati, form of Clearing-house 113 used in New Orleans, form of Clearing-house 109 used in Philadelphia, form of Clearing-house 93 Loan certificates, at Atlanta in 1893, issue of 117 at Baltimore in 1873, issue of 94 at Baltimore in 1893, issue of 108 at Birmingham in 1893, issue of 117 at Boston in 1893, issue of 106 at Boston in 1895, issue of 122 at BuflFalo in 1893, issue of 114 at Chattanooga, Tenn., in 1893, issue of 120 at Cincinnati in 1893, issue of 114 at Detroit in 1893, issue of 1 16 at Louisville, Ky., in 1891, issue of 102 at New Orleans in 1879, issue of 97 at New Orleans in 1896, issue of 122 at New York, aggregate of issues of 106 at New York in 1884, issue of 97 at New York in 1893, issue of 104 at Philadelphia in 1890, issue of . . . .* 102 at Philadelphia in 1893, issue of 108 at Pittsburg in 1893, issue of 116 at St. Louis in 1873, issue of 05 attitude of banks toward 83 Boston 231 by Boston in 1873, issue of 91 by New York association, first issue of 90 INDEX 369 PAGE Loan certificates, by New York association, second issue of... 90 by Philadelphia in 1873, authorization of 91 Chicago, Clearing-house 280 Clearing-house 42, 45, 79 criticism of ' 125 decision of Pennsylvania courts regarding 126 denominations of 82 description of Clearing-house 79 disposition of interest charged on 125 first issue of Clearing-house 84 second issue of Clearing-house 87 third issue of Clearing-house 87 fourth issue of Clearing-house 88, in 1873, issue of 88 in 1890, issue of 99 interest rates on 82 issued in 1890, provision for retirement of 99 issue of Clearing-house 22 New Orleans, obligation with regard to 112 New Orleans, protection against loss from issue of 112 origin of Clearing-house loan 80 resolution adopted by New. York association in 1890 with regard to 98 resolution passed at Philadelphia in 1890 with regard to loi resolution passed by New Orleans association with regard to 108 resolution passed by Richmond association in 1893 with re- gard to 120 retirement of 82 special features of Atlanta 117 St. Louis Clearing-house 285 used in Baltimore, form of Clearing-house 107 used in Birmingham, Ala., form of Clearing-house 121 used in Detroit, form of Clearing-house 115 value of Clearing-house 81 Loan committee 31 duty of 82 for certificates, application to New Orleans iii Loan committees 81 Loaning balances, Boston, borrowing and 233 Japanese Clearing-houses, borrowing and 336 with interest, borrowing and 42, 44 without interest, borrowing and 42, 44 Loans to members, Chicago Clearing-house 280 Loans to the government, extending of 12 Local check 9 Location of Boston Clearing-house 231 Location of Chicago Clearing-house 265 Location of Clearing-house 47 Location of Japanese Clearing-houses 335 Location of London Clearing-house 323 Location of New York Clearing-house, original I34 second ^35 370 INDEX PAGE Location of New York Clearing-house, third 137 London Clearing-house 321 location of 323 origin of 321 Long Island banks, clearing system for 66 Long Island City, Queens county bank 66 Los Angeles, Cal., clearing regulations 51 Loss from issue of loan certihcates, New Orleans, protection against 112 Louisville, Ky., in 1891, issue of loan certificates at 102 for error, fines 57 Lowell, Mass., clearing regulations 55 Lyman, George D., first manager New York Clearing-house.. 142 Manager and secretary, Tokio Clearing-house, rules relating to. 344 Manager, Boston, duties of 245 duties of 30 Manager for balance due, form of order on Chicago Clearing- house 275 order on Chicago Chicago Clearing-house 274 Manager New York Clearing-house, George D. Lyman, first. . 142 William A. Camp, second 142 William Sherer, present 142 Manager's and assistant manager's rooms. New York Clear- ing-house, view in 143 Manager's bond 29 Manager's certificates, St. Louis 292 Manager's check, advantages of 44 Manager's checks 42 liability for 42 Manager's duties, Canadian Clearing-house 302 Manager's gallery. New York Clearing-house 175 Manager's receipt. New York 191 Manager's records of transactions, St. Louis Clearing-house... 294 Manager's report of clearings, St. Louis 295 Manager's settlement sheets, Tokio Clearing-house 341 Manager's settling sheet, Toronto Clearing-houses 306 Map showing check's itinerary "jy Matter, Canadian Clearing-houses, clearing 317 clearing 8 clearing, New York 197 for clearings, St. Louis Clearing-house, proper 294 Japanese Clearing-houses, clearing 336 Medium of settlement, Canadian Clearing-houses 316 Meeting, annual 33 Chicago Clearing-house, annual 282 Meetings of Boston association 244 Meetings, Tokio Clearing-house, kinds of 343 Member bank, New York Clearing-house, resolution authoriz- ing exchanges through a iS3 Members, Boston, expulsion of 243 Boston, withdrawals of 243 Canadian Clearing-houses, defaulting 316 INDEX 371 PAGE Members, Canadian Clearing-houses, expulsion of 303 Canadian Clearing-houses, withdrawals of 303 Chicago Clearing-house, expulsion of 280 Chicago Clearing-house, statement of condition of 277 Chicago Clearing-house, withdrawals of 279 clearing for outside institutions, St. Louis Clearing-house, liability of 287 deposit with Tokio Clearing-house 342 expulsion of Tokio Clearing-house 343 mutual assistance of 12 New York Clearing-house, admission and conduct of 148 New York Clearing-house, expulsion and suspension of... 149 of Chicago Clearing-house, failure of 264 of Tokio Clearing-house 338 Philadelphia, failures of 224 Philadelphia, suspension of 222 St. Louis Clearing-house, admission of 286 St. Louis Clearing-house, expulsion of 286 St. Louis Clearing-house, suspension of 286 Tokio Clearing-house, retirement of 343 treatment of defaulting, New York. . .' 194 Membership, Boston, admissions to 243 Chicago Clearing-house, application for 279 Chicago Clearing-house, restrictions of 279 in Chicago Clearing-house, requirements for 264 New York Clearing-house, statistics of 147 Philadelphia, application for 222 Membership in Tokio Clearing-house, application for 342 banks eligible to 342 Membership of Chicago Clearing-house, original 263 present 263 Membership of St. Louis Clearing-house association 286 Messenger with settling clerk, fac-simile of small ticket de- posited by. New York 179 Messengers and settling clerks 53 Method of carrying checks to Clearing-house 53 Method of collecting country checks 68 Method of conducting the exchanges 54 Method of finding error in clerks' sheets, New York 188 Method of handling collections at Detroit 59 Method of settlement, Chicago Clearing-house 268 Method of settling balances, Philadelphia 212 Methods of calculating interest on certificates 123 Methods of delivery, Baltimore 54 Cincinnati 54 Methods of delivering items 55 Methods of settlement of balances 36 Milwaukee fines for tardiness 54 Money and certificates used in settlement of balances, record of. New York I94 Money centre 6 Money employed in settling balances, Chicago Clearing-house, kinds of 268 372 INDEX PAGE Money in labelled packages 38 Money paid in packages, New York 188 Money, settling balances without 40 settlements of balances with 2i7 Mutual assistance of members 12 National bank statements, form used at New York Clearing- house in tabulating 160 National banks. New York Clearing-house, skeleton of quar- terly statement of 165 National Clearing-house 65 New Bedford, Mass., clearing at 58 two clearings per day 57 New Haven, Conn,, clearing regulations 51 New Orleans associated banks^ communication addressed to cashiers of no resolution passed by boards of directors of iii New Orleans association with regard to loan certificates, reso- lution passed by 108 New Orleans clearing regulations 52 New Orleans, form of Clearing-house loan certificate used in.. 109 in 1879, issue of loan certificates at 97 in 1896, issue of loan certificates at 122 loan committee for certificates, application to in obligation with regard to loan certificates 112 protection against loss from issue of loan certificates 112 ratification of issue of Clearing-house loan certificates 112 resolution limiting amount of payment 114 New York, aggregate of issues of loan certificates at 106 agreement to comply with rules and regulations regarding collections outside of 172 New York association, first issue of loan certificates by 90 in 1890, with regard to loan certificates, resolution adopted by 98 second issue of loan certificates by 90 New York Clearing-house 127 admission and conduct of members 148 admission fee 148 application to clear for another bank 154 arbitration committee 146 association of trust companies, form of statement required by the 159 building company 137 building fund 136 clearing for non-members 150 Clearing-house committee 144 Clearing-room of 49 committee on admissions 146 committees of 144 conference committee 145 consent to clear for another bank 155 daily routine of the 175 defects of original system 129 INDEX 373 PAGE New York Clearing-house, duties of officers 140 expulsion and suspension of members 149 form of statement required of associated banks 164 George D. Lyman, first manager 142 hour of exchanges 175 in 1873, form of loan certificate used by 89 ki tabulating national bank statements, form used at 160 in tabulating State bank statements, form used at 161 manager's gallery 175 nominating committee 146 original location of 134 origin of 127 provisions of constitution 140 records of the 173 relationship of trust companies to 157 resolution authorizing exchanges through a member bank. 153 rules and regulations regarding outside collections 168 second location of 135 skeleton of quarterly statement of national banks 165 skeleton of weekly statement of non-member banks 167 statistics of membership 147 third location of 137 view down Cedar street 141 view in Clearing-room 181 view of 139 view in manager's and assistant manager's rooms 143 William A, Camp, second manager 142 William J. Gilpin, assistant manager 144 William Sherer, present manager 142 New York Clearing-room, description of 175 New York, collections outside the city of 168 form of summary of weekly statement of the associated banks of the city of 163 in 1884, issue of loan certificates at 97 in 1893, issue of loan certificates at 104 methods in London Clearing-house, introduction of 323 out-of-town items, collecting 22 skeleton of the quarterly statement of the condition of the State banks of the city of 166 skeleton of the weekly statement of the associated banks of the city of 162 time required to make exchanges 56 Nominating committee 3i> 32 New York Clearing-house 146 Non-member banks, Chicago Clearing-house 276 form of statement of weekly averages of Brooklyn 156 New York Clearing-house, skeleton of weekly statement of 167 Non-members, Canadian Clearing-houses, clearing of '304 Japanese Clearing-houses, clearing for 337 New York Clearing-house, clearing for 150 Tokio Clearing-house, clearing for 343 Notes, Canadian Clearing-houses, treatment of 317 in settlement of balances, Boston, circulating 229 374 INDEX PAGE Notifying manager of amounts paid in making settlements, tickets used by Boston banks for 234 Number of banks belonging to Canadian Clearing-houses 302 Number of clearings, Japanese Clearing-houses 336 Number of Japanese Clearing-houses 335 Number of transactions, New York 176 Object of a Clearing-house, primary 11 Object of Tokio Clearing-house 340 Objection to country checks 64 Objection to silver ;^S Objects of Canadian Clearing-houses 300 Obligation with regard to loan certificates, New Orleans 112 Officers and committees, Boston, election of 244 St. Louis Clearing-house, duties of 288 Officers of a Clearing-house 28 Officers, New York Clearing-house, duties of • 140 St. Louis Clearing-house, provision regarding 287 Operations of Clearing-house, St. Louis 289 Opposition to adoption of constitution. New York Clearing- house 134 Order on Chicago Clearing-house manager for balance due, form of 275 Order used in transferring balances that have been loaned, Chicago, form of 273 Orders, Chicago Clearing-house, settlements of amounts of. ... 274 Organization, Boston, date of 228 of foreign department of Boston Clearing-house 246 of Philadelphia Clearing-house association, date of 209 of St. Louis Clearing-house association 285 Origin of Clearing-house loan certificates 80 Origin of London Clearing-house 321 Origin of New York Clearing-house 127 Original location of New York Clearing-house 134 Original membership of Chicago. Clearing-house 263 Original system. New York Clearing-house, defects of 129 Osaka Clearing-house association 335 Out-of-town checks, foreign department, Boston Clearing- house, regulations for collection of 251 Out-of-town correspondents, Fargo, So. Dak., clearing for 51 Out-of-town items, collecting. New York 22 Outside banks and trust companies, Boston, clearing for 238 Outside collections. New York Clearing-house, rules and regu- lations regarding 168 Outside institutions clearing through St. Louis Clearing-house association 287 Outside the city of New York, collections 168 Packages, money in labelled 38 money paid in. New York 188 Payment of balances. Canadian Clearing-houses 3^4 Payment of debit balances. New York 188 Payment, New Orleans, resolution limiting amount of 114 INDEX 375 PAGE Payments, London, white ticket for ^^^ Penalties, Tokio Clearing-house, rules regarding 345 Pennsylvania courts regarding loan certificates, decision of..!'. 126 Personal check p Philadelphia, form of Clearing-house loan certificate used in... 93 in 1873, authorization of loan certificates by 91 in 1890, issue of loan certificates at 102 in 1890, with regard to loan certificates, resolution passed at loi in 1893, issue of loan certificates at 108 runners' exchange 210 the Clearing-house association of the banks of 209 two clearings per day 57 Pittsburg in 1893, issue of loan certificates at 116 Plan of administration in Canada 33 Powers of Tokio Clearing-house committee, duties and 344 President, duties of 28 Primary object of a Clearing-house 11 Printing, expenses of New York 199 St. Louis Clearing-house, expense of 288 Proof clerk's sheet, form of, New York 187 Proof used in Toronto Clearing-house, form of 311 Proper matter for clearings, St. Louis 294 Property, purchase of Cedar street 138 Pro rating of expenses, New York 198 Protection against loss from issue of loan certificates. New Orleans 112 Provision for retirement of loan certificates issue in 1890 99 Provision regarding officers, St. Louis Clearing-house 287 Provision regarding statements, Philadelphia 216 Provision respecting changes of constitution and by-laws, Tokio Clearing-house 345 Provisions of constitution. New York Clearing-house 140 Provisions relating to Tokio Clearing-house committee 344 Purchase of Cedar street property 138 Qualified indorsements, restrictive or, New York 197 Quarterly statement of national banks, New York Clearing- house, skeleton of 165 Quarterly statement of the condition of the State banks of the city of New York, skeleton of the 166 Queens county bank. Long Island City 66 Rank of St. Louis Clearing-house 296 Rate of charges, Toledo, 16 Rate of exchange, Buffalo agreement 14 Houston, Tex 16 Rate on average balances at St. Joseph, Mo 13 Rate on bank balances at Sioux City, la 13 Rates of exchange, Baltimore, 1897 IS fixing uniform _ ^4 Rates of interest on deposits, fixing uniform 13 uniform 24 Rates for collection, Topeka, Kan 16 376 INDEX PAGE Rates on loan certificates, interest 82 Ratification of issue of Clearing-house certificates, New Or- leans 112 Ratio of balances to clearings 36 Receipt for balance, Buffalo 39, 40, 41 Receipt, manager's. New York '191 Receipts, delivery clerk's. New York 179 form of delivery clerk's, New York 182 London, green ticket for 332 Reclamations for errors or deficiencies in contents of sealed bags and packages. New York 196 Record of exchanges, Chicago Clearing-house 281 Record of money and certificates used in settlement of balances, New York 194 Records of the New York Clearing-house 173 Records of transactions, St. Louis Clearing-house, manager's.. 294 Refusal to pay dishonored bills, Tokio Clearing-house 343 Regulations for collection of out-of-town checks, foreign de- partment, Boston Clearing-house 251 Regulations governing foreign department, Boston Clearing- house, rules and 248 Regulations of Tokio Clearing-house, rules and 340 Regulations regarding outside collections. New York Clearing- house, rules and 168 Relationship of trust companies to New York Clearing-house. . 157 Remedy for country checks 64 Reorganization of Tokio Clearing-house ^;i7 Report of balances, New York 184 Report of clearings, St. Louis, manager's 295 Report of committee on foreign department, Boston Clearing- house 246 Report to his bank of daily balances, form of settling clerk's. New York 189 Reports used in trading balances, Chicago, forms of 271 Requirements for membership in Chicago Clearing-house 264 Resolution adopted by Cincinnati association with regard to loan certificates 95, 96 Resolution adopted by collecting banks, foreign department, Boston Clearing-house 251 Resolution adopted by New York association in 1890, with re- gard to loan certificates 98 Resolution authorizing exchanges through a member bank. New York Clearing-house i53 Resolution limiting amount of payment. New Orleans 114 Resolution passed at Philadelphia in 1890, with regard to loan certificates loi Resolution passed by boards of directors of New Orleans as- sociated banks 1 1 1 Resolution passed by New Orleans association, with regard to loan certificates ^ 108 Resolution passed by Richmond association in 1893, with regard to loan certificates 120 Responsibility of association for balances, New York I95 INDEX 377 PAGE Restricted indorsements 52 Chicago Clearing-house 278 Restrictions of membership, Chicago Clearing-house 279 Restrictive or qualified indorsements, New York 197 Results of exchange of items 35 Retirement of loan certificates 82 issued in 1890, provision for 99 Retirement of members, Tokio Clearing-house 343 Return, Boston, average weekly 240 Rhawn, William H., proposed introduction of second exchange, Philadelphia 210 Richmond association in 1893, with regard to loan certificates, resolution passed by 120 Richmond, Va., associated banks, certificate of deposit used by 43 Rochester, N. Y., schedule of collection charges 15 Rockford, 111., clearing regulations 52 Roll call of clerks. West Superior, Wis 54 Rooms, New York Clearing-house, view in manager's and as- sistant manager's 143 Routine of exchange, Chicago Clearing-house 266 New York 179 Routine of exchanges, Canadian Clearing-houses 304 Routine of the New York Clearing-house, daily * 175 Rules and regulations governing foreign department, Boston Clearing-house 248 Rules and regulations of Tokio Clearing-house 340 Rules and regulations regarding collections outside of New York, agreement to comply with 172 Rules and regulations regarding outside collections, New York Clearing-house 168 Rules concerning Tokio clearing banks 342 Rules for clearing, Tokio Clearing-house 340 Rules of Tokio Clearing-house 337 Rules regarding penalties, Tokio Clearing-house 345 Rules regulating clearing-matter 50 Rules relating to expenditures, Tokio Clearing-house 345 Rules relating to manager and secretary, Tokio Clearing-house 344 Runners' exchange, Philadelphia 210 Philadelphia, due-bill 211 St. Joseph, Mo., charges on collections 20 rate on average balances 13 St. Louis Clearing-house 285 rank of 296 St. Louis Clearing-house association, membership of 286 organization of 285 St. Louis in 1873, issue of loan certificates at 95 St. Paul, Minn., clearing regulations 52 San Francisco, Cal., two clearings per day S7 Savannah, Ga., clearing regulations $2 Scale of fines. New York 201 Schedule of collection charges, Rochester, N. Y 15 378 INDEX PAGE Scranton, Pa., clearing regulations 52 Sealed bags or packages, reclamations for errors or deficiencies in contents of, New York 196 Second delivery voucher, Toronto Clearing-house 306 Toronto Clearing-house, fac-simile of 309 Second exchange, Philadelphia, William H. Rhawn, proposed introduction of 210 Second issue of Clearing-house loan certificates 87 Second issue of loan certificates by New York association 90 Second location of New York Clearing-house 135 Second ticket, New York , 180 form of, New York 185 Secretary, Tokio Clearing-house, rules relating to manager and 344 Securities in the custody of Philadelphia Clearing-house com- mittee, examination of 220 Sedalia, Mo., Clearing-house association 65 Settlement 8 Canadian Clearing-houses, medium of 316 Chicago Clearing-house, method of 268 Settlement of balances 25, 26, 27 Boston 232 Boston, circulating notes in 229 Chicago Clearing-house 268 Japanese Clearing-houses 336 methods of 36 record of money and certificates used in 194 Tokio Clearing-house 340 with money 37 Settlement of claims, Tokio Clearing-house 340 Settlement of Clearing-house balances 35 Settlement sheets, Tokio Clearing-house, manager's 341 Settlements, Canadian 37 Chicago Clearing-house, cash 272 of amounts of orders, Chicago Clearing-house 274 Settling balances, Chicago Clearing-house, kinds of money em- ployed in 268 Philadelphia, method of 212 without money 40 Settling by draft 42, 45 Settling clerk, New York 176 form of small ticket deposited by messenger with, New York 179 Tokio Clearing-house, duties of 340 Settling clerks, messengers and 53 Settling clerk's report to his bank of daily balances, form of. New York 189 Settling clerk's statement, foreign department, Boston Clear- ing-house 258 foreign department, Boston Clearing-house, form of 261 form of. New York 183 Settling sheet, Toronto Clearing-houses, manager's 306 Shares, Clearing-house, New York 200 Sheet for entering balances, London 328 INDEX 379 PAGE Sheet, form of proof clerk's, New York 187 Toronto Clearing-houses, manager's settling 306 Sheets, method of finding error in clerks', New York 188 Sherer, William, present manager New York Clearing-house.. 142 Shipping currency by express 24 Silver, objection to 38 Single instance of failure, Canadian Clearing-houses 303 Sioux City, la., rate on bank balances 13 Skeleton of quarterly statement of national banks. New York Clearing-house 165 Skeleton of the quarterly statement of the condition of the State banks of the city of New York 166 Skeleton of the weekly statement of the associated banks of the city of New York 162 Skeleton of weekly statement of non-member banks, New York Clearing-house 167 Slip, exchange, New York 176 form of exchange, New York 177 Slips, Cincinnati 55 of Tokio credit banks, balance 341 Smallest balance from one day's exchanges, New York Clear- ing-house 208 Smallest balance paid by New York Clearing-house to one bank 208 Smallest balance paid to New York Clearing-house by one bank 208 Smallest transactions for one day. New York Clearing-house.. 207 Small ticket, New York 177, 179 deposited by messenger with settling clerk, fac-simile of. New York 179 Special bank examiners 25 Special features of Atlanta loan certificates 117 Special functions of a Clearing-house n Springfield, Mass., clearing regulations 51 Springfield, O., clearing regulations 51 State banks of the city of New York, skeleton of the quarterly statement of the condition of the 166 State bank statements, form used at New York Clearing-house in tabulating 161 Statement, Boston, weekly 239 employed at Toronto, form of delivery 305 form of settling clerk's, New York. 183 form of Toronto Clearing-houses, delivery 305 of associated banks, Boston 241 of average condition, Philadelphia 218 Philadelphia, daily ,• • .- • 217 required by the New York Clearing-house association of trust companies, form of iSp required of associated banks. New York Clearing-house, form of 104 required of Philadelphia banks, weekly 215 Statement of condition, St. Louis Clearing-house 288 of members, Chicago Clearing-house • • • • • VI Statement of national banks, New York Clearing-house, skele- ton of quarterly • ^^5 38o INDEX PAGE Statement of non-member banks, New York Clearing-house, skeleton of weekly 167 Statement of the associated banks of the city of New York, skeleton of weekly 162 form of summary of weekly 163 Statement of the condition of the State banks of the city of New York, skeleton of quarterly 166 Statement of weekly averages of Brooklyn non-member banks, form of 156 Statements, form used at New York Clearing-house in tabulat- ing national bank 160 form used at New York Clearing-house in tabulating State bank 161 of condition, Canadian Clearing-houses 318 Philadelphia, provision regarding 216 Stationery used by banks, New York 177 Statistics of membership, New York Clearing-house 147 Suggestions on banks and currency of the several United States, Albert Gallatin 130 Suspension of members. New York Clearing-house, expulsion and 149 Philadelphia 222 St. Louis Clearing-house 286 Summary of weekly statement of the associated banks of the city of New York, form of 163 System, Birmingham currency 118 for Long Island banks, clearing system for 66 of collection charges, St. Louis, Mo 17 possible developments of the Clearing-house 23 Systems of the Dominion of Canada, banking and currency 297 Table showing balances paid in money for forty-six years, New York 205 Table showing clearings for forty-six years. New York 203 Tabulating national bank statements, form used at New York Clearing-house in 160 Tabulating State bank statements, form used at New York Clearing-house in 161 Tardiness, fines for 54 fines for, Milwaukee 54 Telegraph, transfers by, Denver 21 Tender certificates, legal 42, 45 Terms, Clearing-house 3 Third issue of Clearing-house loan certificates 87 Third location of New York Clearing-house I37 Ticket deposited by messenger with settling clerk, fac-simile of small. New York I79 Ticket, first. New York 176 foreign department, Boston Clearing-house, exchange 253 form of first or credit, New York 178 form of second. New York 185 for payments, London, white 333 for receipts, London, green 332 INDEX 38: PAGE Ticket, second, New York 180 small, New York 177, 179 used by Boston banks for notifying manager of amounts paid in making settlements 234 Time allowed for making exchanges, New York 184 Time required to make exchanges 56 New York 56 To clear 4 Tokio clearing banks, rules concerning 342 Tokio Clearing-house committee, duties and powers of 344 provisions relating to 344 Tokio Clearing-house, application for membership in 342 arrangement of banks in 339 association 335 banks eligible to membership in 342 clearing for non-members 343 clearing matter 340 dishonored items 341 duties of settling clerk 340 expenses of 342 / hours of clearing 340 kinds of meetings 343 manager's settlement sheets 341 members' deposit with 342 expulsion of 343 members of 33^ object of 340 provision respecting changes of constitution and by-laws. . 345 refusal to pay dishonored bills 343 reorganization of 337 retirement of members 343 rules and regulations of 34° rules for clearing 340 rules of 337 rules regarding penalties 345 rules relating to expenditures 345 rules relating to manager and secretary 344 settlement of balances 340 settlement of claims 340 Tokio credit banks, balance slips of 341 Toledo, O., clearing regulations 5i rate of charges 16 Topeka. Kan., clearing regulations 51 rates of collection I7 Trading balances, Chicago Clearing-house 270 Chicago, forms of reports used in • 271 Transferring balances that have been loaned, Chicago, form of < order used in • ^73 Transactions for one day, New York Clearing-house, largest.. 207 New York Clearing-house, smallest 207 Transactions, number of. New York 170 St. Louis Clearing-house, manager's records of 294 Transfer of Clearing-house certificates, fine for, New York.... 190 382 INDEX PAGE Transfers by telegraph, Denver 21 Treatment of defaulting members, New York 194 Treatment of notes, Canadian Clearing-houses 317 Toronto Clearing-houses, credit voucher 308 debit vouchers 310 examination of items 310 fac-simile of credit voucher used at 313 fac-simile of debit voucher used at 315 fac-simile of first delivery voucher 307 fac-simile of second delivery voucher 309 form of delivery statement 305 form of delivery statement employed at 305 form of proof used in 311 manager's settling sheet 306 second delivery voucher 306 Treasurer, duties of 25 Trust companies, Boston, clearing for outside banks and 238 form of statement required by the New York Clearing- house association of 159 to New York Clearing-house, relationship of 157 Trust fund, Boston 238 Two clearings a day 57 Two clearings per day, New Bedford, Mass 57 Philadelphia 57 San Francisco, Cal 57 Uniform rates of exchange, fixing 14 Uniform rates of interest on deposits 24 fixing 13 Use of checks and drafts, extensive 62 Value of Clearing-house loan certificates 81 Vice-president, duties of 29 View in Clearing-room, New York Clearing-house 181 View in manager's and assistant manager's rooms. New York Clearing-house 143 View of New York Clearing-house 139 Volume of clearings, Chicago Clearing-house 280 Voucher, Toronto Clearing-houses, credit 308 Toronto Clearing-houses, fac-simile of first delivery 307 Toronto Clearing-houses, fac-simile of second delivery 309 Toronto Clearing-houses, second delivery 306 Voucher used at Toronto, fac-simile of credit 313 fac-simile of debit 3^5 Vouchers, Toronto Clearing-house, credit 310 Waco, Tex., clearing regulations 52 Washington, D. C, clearing regulations 52 Weekly averages of Brooklyn non-member banks, form of statement of 156 Weekly return, Boston, average 240 INDEX 383 PAGE Weekly statement, Boston 239 of non-member banks, New York Clearing-house, skele- ton of 167 required of Philadelphia banks 215 with Boston and New York statements, comparison of Philadelphia 216 Weekly statement of the associated banks of the city of New York, form of summary of 163 skeleton of the 162 West Superior, Wis., charges on collections 19 roll call of clerks 54 White ticket for payments, London 333 Withdrawal of members, Boston 243 Canadian Clearing-houses 303 Chicago Clearing-house 279 Woodward Brothers, journey of check drawn by 74 Worcester, Mass., clearing regulations 51 Youngstown, O., clearing regulations 52 f^' or iBB w UNIVERSITY OF CALIFORNIA LIBRARY This book is DUE on the last date stamped below. <^ttf!iPf!!IB'lffie3SuTeH 25 cents On first ^<^ -^* ^.. ..-, ' '* ■ 50 cents on fourth day overdue . < tifaj.7^ C^eck>Uar 0fl $CYj9fltii.iiay'OVeiNkM9,--J* OCT 8 1947 OCT 16 1947 DEC 16 1947 JAN 5 194{; MAR 23 1948 30»a<'S0U^ ■^y. n in APR 9'«3^^' LD 21-100m-12,*46(A2012sl6)4120 6Wav'58BB 5 -J a: o: CO 5 O SENT ON ILL SEP 1 7 2003 U. C. BERKELEY YC