Vermont phÅ“nix. [volume] (Brattleboro, Vt.) 1834-1955, 1873-10-31
THE CLB.sRE.vG.HOUSE.
WHAT IT IS, AND WHY, EXPLAINED TO THF
DuLLEsT COMPREHENSION.

DULLEST COMPREHENSION.
In every city, each bank is continually
receiving checks and drafts on the other
banks in the same city. Thus, John Jones
"does business" with the FIRST national, and
q customer pays the amount owing TO Jones
with check on the Second national. Jones
does not send his check TO the Second ma
tional for the money, but he endorses the
check, and sends it with the rest ofhis de-
post to the First national, where he gets
credit for it at once; also the Podunk ma
tional bank, the president of which keeps
a country store, while the cashier is feed
ing "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 are all
sent to the First national for collection, the
amount TO be credited to the balance 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
90 round TO the Second and other banks,
and get the money for them. Butthere are
many banks ia 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 collec-
tons TO make on each of the others, so that
there is, in fact, an interminable system of
cross accounts between all the banks in
good standing in every large city. In the
ri f,,rpnorlt in a nj
now, the practice is TO send messenger
from each bank TO each bank, and thus col
lect or pay the difference. Thus the clerk
of the First national would take the check
which Jones deposited, and go TO the Sec
ond national and get the money. Then
pursuing his travel, he would go round to
each of the banks on which the Podunk
bank had drawn or sent drafts, and get
either the money or collections on the First
national therefor But perhaps when he
arrived at the Third national he would find
in tina; bank collections against his own
amounting to more than the money he had
with him. He must then either 60 back
and get the money to pay the amount, or
else the Third national must send the col
lections by its own messenger to the First,
and thus get the amount due. In practice,
this latter method was adopted, and in
every large city there was travelling
through the streets an endless succession
of bank messengers, crossing each others
path, and hindering each other and other
customers at each bank counter.
The clearing house is bank, with banks
for dealers, just as Il institution we call a
bank has individuals for customers. John
Jones, who does business at the First ma
tional agrees 10 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 collects, and at 8 p. m.
daily he must make the two sides of his ac-
count balance, or he is broken the amount
he has 10 pay TO effect this is his debtor
balance the amount he has left over at 3
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 transfer of debts and credits, until the
final transfer of cash between the parties is
reduced to the smallest possible amount.
AS between Jones and the public, the bank
is the common debtor aud common credit
or; as between the Fr-t 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 clearing
house messenger with all the checks and
drafts on every other bank in the associa-
ton. Each clerk delivers to the manager
of the clearinghouse statement showing
how much each of the other banks should
pay his own, and the footing of the state
ment shows, of course, how much all the
banks should pay his own. The amount of
each of these statements the messenger en-
ters on blank prepared for that purpose,
so that it shows when completed the exact
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 Sec
ond national the check Jones deposited, to-
eether with drafts from country banks. The
Second national clerk gives to the First ma
tional clerk a statement of the sums he de-
sires to collect and the checks or drafts
which go to make up the sum. These state
ments are copied by each clerk for himself
so each in very short time knows wheth-
err his bank has to pay out or will receive
money on the whole bulk Of the exchange
for that day, and the manager, by the use
of his duplicate statement, can tell at a
glance the whole of the amount of the ex'
change for the day, the whole amount due