Watertown republican. [volume] (Watertown, Wis.) 1860-1906, 1875-05-19


BILE to strengthen each other, as will be
shown hereafter. At the breaking out
of the Rebellion the United States gov
eminent could not have raised loans
necessary to carry on the war without
the aid of the New York banks, and it
is certain that without the aid Of the
Clearing House Association the banks
could not have furnished the funds.
The first critical test to which the Clear
ing House was subjected was during
the panic of 1857, when was demon
strated in the most satisfactory manner
it's strength and permanency. During
that memorable financial tornado the
banks of New York were unable to
make settlements. They would make
their exchanges, but the gold was all
gone, and it was impossible to adjust
differences.
1t is matter of history that the
precious metal was as completely drawn
from circulation as though it had never
been medium. The banks held plen-
ty of assets but they were not available
for the emergency. 1t became necessa-
" therefore to devise some means
whereby the temporary embarrassment
could be relieved, and committee was
appointed for that purpose. At that
time there was in circulation large
amount of currency issued by the state
banks. The Metropolitan Bank of New
York was appointed by the association
to receive all of this state money, and
certificates representing it were issued,
known as Metropolitan certificates. They
bore interest, and. by vote Of the as
sociated banks, were used in the pay
ment of balances due at the Clearing
House. By this combined action of the
New York banks, not only was the gen
eral ruin of themselves averted, but it
was also of incalcIlable benefit to the
state banks, for as soon as the excite
ment subsidized they were able in a short
time to redeem their own notes. The
largest amount of Clearing House GER
tifcat in use in the city of New York
at any one time was 100000.
THE PANIC OF 1873,
and from which the country has not
yet recovered, is still fresh in the men,
cries of the people, and a short nara
ton of the action Of the Clearing
House Association at that time will be
found of more than ordinary interest.
While in 1857 it was gold which sud
denly was withdrawn from circulation,
in the latter panic it was United States
legal tender notes. In accordance with
resolution, each bank was compelled
to report to the manager daily it's iabil-
tiles and the amount of legal tenders in
its possession. The object of this was
to equalize the strength of the associat-
ed banks, If it was found that one
bank held more than it's proportion of
legal tender notes it would receive for
the amount it had in excess a loan GER
tifcate, which bore interest. The weak
er banks drew from the Clearing House
the amount required to make up what
they were short, and by thus acting In
concert all were saved and terrible
disaster prevented.
THE CLEARING HOUSE AND THE GOVERN
MENT.
The experience gained In 1857 was
turned to good account in 1861, and
contributed largely to the organization
of the Loan Committee, through whom
loans were made to the government of
$1O5, 435, 903, its proportion of the $780,,
100000 loan, by the cities of Boston,
Philadelphia and New York. During
the war the government issued certih
Gates of Indebtedness bearing interest,
which were found to be desirable as
reserve for banks. Accordingly, an ar
rangement was made for the issue of
special certificates bearing interest,
available only to banks, members of
Clearing House Associations, and which
were recognized in the National Bank
ing act as a part of the lawful
reserve of national bank. The
principal was made payable in. legal
tender notes on demand at the office of
the Assistant Treasurer Of the United
States in New York, and the interest to
the manager of the Clearing House and
the chairman of the Clearing House
Committee jointly. The interest was
made payable semi-annually. The GER
tifcates were made payable by vote of
the Association IN the settlement of
balances at the Clearing House and
were SO used, thus daily changing the
amount held by each bank, and fire.
quently by the presentation Of them by
individual banks to the Assistant Treas
urer of the United States for payment
of the aggregate amount issued. The
interest was collected and disbursed
every six months bythe Clearing House,
and each bank received the exact amount
of interest due it, Notwithstanding the
fact that the amount held by each bank
had changed almost daily during the
entire period.
The amount Of loan certificates is
sued in 1873 was 500, 565, OOe, but the
largest amount outstanding at any one
time was $23, 100000. The emergency
over, these certificates were, of course,
gradually retired.
There are fifteen banks in the city
not members of the association with a
capital of So, 100000
Some idea of the magnitude of the
business transacted may be gathered
by the following interesting statistics,
which have been carefully compiled:
The association at the present time
consists of fifty nine members.
The total capital of the banks, mem
bers of the association, is $81 1855, 100.
The largest amount of business tran
sacted on any one day was on the 18th
of November, 1868. when it reached
the enormous aggregate of $2O6, 0Oe, 600.
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