The daily dispatch. [volume] (Richmond [Va.]) 1850-1884, 1873-10-17
THE CLEAR.SG-H0USE.
WHAT IT rs, ANfs-rwHY,.E xpEH7NED rTo
N TILE, DULL, ssH~ CeaiPREHENsIoN. =

ccivinc checks and drafts on the other banks
in Inc same city. Thus, John Jones "dOes
p, business" with the First National, and a
! customer pays the amount owing to Jones
with check on the Second National. Jones
does not send his check to the Second National
! for the money, but he endorses the check, and
sends 1t with the rest of his depositto the First
National, where he gets credit for 1t Mt once;
also the Podunk MAI onal Bank, the presi'
dent of which keeps a country store, While
the cashier is fecdinga "little bunch Of cattle"
has the First National for Its correspondent
in Chicago. The Podunk receives In deposit
drafts on other banks in Chicago. and these
arc all sent to the First National for collec-
ance, upon which the Podunk itself will
draw when selling Chicago exchange. Now,
nothing would appear more simple and easy
than for the cashier of the First National
to put in his pocket these checks and drafts
and 60 round to the Second and other banks
and get the money for them. But there are
many banks In Chicago, each OF which has
many depositors, and many country banks
and brokers for correspondents, and each OF
these city banks has or may have collections
to make on each Of the others, 80 that there
is in fact an intcrminablc system Of cross
accounts between. all the banks in good
standing in every large city. In the great
cities formerly, and in the small ones now,
the practice is to send Il mesSengcrtrom each
bank to each bank, and thus collect or
pay the difference. Thus the clerk OF the
First National would take the check which
Jones deposited and 60 to the Second Ne
tional and get the money. Then pursuing
his travel, he would 20 round to each Of the
banks on which the Podunk bank had drawn
I,s,r Of lao or
collections on the First National therefor.
But perhaps when he arrived at the Third
National he would find in that bank colcc-
tons against his own amounting TO more
than the money he had with him. He must
then either go back and get the money to
pay the amount, or else the Third National
! must send the collections by its own mesSen n
! ger to the First, aud thus get the amount
! due. In practice, this latter method was
! adopted, aud in every large city there was
/ travelling through the streets and endless
/ succession Of bank messengers crossing each
others path and hindering each other and
/ other customers at each bank-counter.
THE CLEARINGHOUSE is BANK,
! with banks for dealers. just as the institution
we call bank has individuals for customers.
John Jones, who does business ut the First
National, agrees to pay all his notes and all
the drafts upon him at that bank. He also
takes there all the notes of his customers,
and the checks and drafts paid him, as well
As the money he elects, and at 3 T. NJ. daily
he must make the two sides of his account
balance, or he is broken. The amount he
has 70 pay to effect this is his debtor balance !;
the amount he has left over at O'Clock is
his creditor balance. The First National
and all other banks send to the clearing
house the demands they have on each, and
the balance must be made up in cash, or the
bank failing to do so is broken. In either
case the settlement is effected by the trans
| fer Of debts and credits until the final trans
! fer of cash between the parties is reduced to
the smallest possible amount. AS between
Jones and the public, the bnnk is the COM
mon debtor and common creditor; as be.
tween the First National and the other banks,
the clearinghouse suStains exactly the same
relation. .- -.
Every day, at the hour agreed upon by the
rules, each bank sends to the clearinghouse
a messenger with all the checks and drafts
! on every other bank in the association.
Each clerk delivers to the manager OF the
| clearinghouse q statement showing how
much each of the other banks should pay
his own; and the footing Of the statement
shows, Of course, how much all the banks
| should pay his own. The amount Of each
of these statements the messenger enters
on a blank prepared for that purpose, SO
| that it shows, when completed, the eX-
act amount which each bank should receive,
and the total shows the amount which
all should receive. Then each clerk gives
to each of the others the checks and
drafts to be paid, with statement of the
amount thus the First National clerk gives
to the Second National the check Jones de-
posted, together with drafts from country
banks. The Second National clerk gives to
the First National clerk statement Of the
sum he desires to collect, and the checks or
drafts which go to make up the sum. These
statements are copied by each clerk for him
self; so each in very short time knows
whether his bank has to pay out or will re-
ceive money on the whole bulk of the eX-
change for that day, and the manager, by the
use Of his duplicate statements, can tell at a
glance the whole Of the amount of the OK
change for the day, the whole amount due
all the banks, the amount due each, and the
amount due from each, and these duplicate
amounts, in the hands Of the clerks and on
the desk of the manager, must be balanced
before any clerk leaves the room, so that
al mistakes are prevented from getting into
the banks. II any occur in the clearing.
house they are discovered, and in some rs.
sociations the person making them is fined a
| small amount, When statements are COM
pleted and proven each clerk goes back to
his bank, bearing with him statement OF
assured correctness, showing the total
amount the bank owes all the others, and
the amount owed each, or, as the case may
be, the amount drawn from each. Later in
the day lat ! 2. NJ in New York, the
debtor banks begin to send to the clearing
house the amounts they severally owe, as
| shown by the statements; and these are sent
in single sum, so that the First National
sends in one package all the money it owes
all the other banks. The clearinghouse
manager receipts for each amount, and then
distributes it, so that when, an hour later, the
checks of other banks arrive, each receives
in q single pile the amount due his bank from
all the others.
THE GREAT ADVANTAGE OF TIE SYSTEM
is shown BY the avoidance of errors between
banks. and by the saving of time. The
amount of money to be transferred from the
banks to the clearinghouse is very small
compared with the bulk Of the exchange.
In the first five years Of the establishment oil
the New York cleariDg-house-from 1898 to
| 1S5S-the clearings amounted to $30,675,
933, $685.. while the amount OF specie ana
coin certificates in which the balances were
then paid was 1874, 430, $3.50. As. But the
transfer and counting OF this amount OF
specie was found to be troublesome, and be-
fore the clearinghouse had existed i've years