Clearing House

a central office where representatives of different banks meet to exchange checks and drafts. At the close of a day's business each bank in a city finds that it holds checks upon the other banks for various amounts. Where there are but a few banks, a clerk goes out the next morning and presents these checks, but in cities with many banks the clerks meet as stated at a given hour, usually 9 A. M. A few minutes are quite sufficient to do the work that would otherwise require travel and expenditure of valuable time. In large clearing houses a desk is provided for each bank holding membership, also a central desk for a manager. Each bank is represented by two clerks. One takes a seat at the desk, the other passes around the circle delivering the bundles of checks which he holds against the various banks. A deposit slip or statement is delivered with each bundle of checks, and a general statement is handed to the manager. If a bank receives checks in excess of its total deposits, it pays the manager the balance in cash. If a bank deposits checks exceeding in value those received, it receives the balance in cash. If the accounts be correct, the manager receives precisely as much cash as he pays out. Fines are imposed for tardiness and inaccuracy.

In the New York clearing house, consisting of sixty or more members, fortyfive minutes are allowed for the settlement of business that would otherwise require the time of many messengers and the transportation of enormous quantities of money with attendant risks and expenses.

The manager of the New York clearing house, writing in the Americana in 1902, states that the daily clearings of the various cities of the United States, if made by messengers with coin, would require the transportation of 700 tons of the precious metals daily; while under the present system less than five per cent of the daily exchanges are settled in money. The system originated, it is claimed, in Edinburgh near the close of the eighteenth century. The earliest authentic records date from 1770 when the London bank clerks arranged for a meeting in an informal way at a central room to exchange deposits and pay balances. It is everywhere customary for the smaller banks, and country banks not members of the clearing house association, to make their deposits with banking members. American clearings for 101 cities in 1908 were $131,285,367,000. The Canadian clearings for the same year were $4,142,000,000.

The following table, compiled by The American Banker, shows the volume of business done in the clearing houses of the principal cities of the United States for 1908. It shows New York to be the financial metropolis of the nation; Boston, of New England; Chicago, of the Middle West; and San Francisco, of the Pacific States.

Total Pacific States . . . . . $3,879,716,462