The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1894-05-16
THE CLEARINGHOUSE.

| From the Youths Companion.
| Several readers in different parts Of
the country have asked us TO explain
the principle of the clearinghouse"
We comply with the requests the more
readily because the explanations in
the encyclopedias can be understood
siderable knowledge of banking.
We will start with these facts: That
| almost every business and professional
man in the country keeps all the money
which he does not need for casual per-
sonal expenses on deposit in bank;
that he pays nearly all his bills by
means of checks; that consequently he
receives payments for the most part in
checks drawn by those who owe him;
that he does not. on receiving a check,
go or send to the bank to procure the
money, but deposits it to his credit in
his own bank; and that there are many
banks in every large city.
Now wholesale merchant may re-
ceive each day a large number of
checks, some on one bank, some on
another. OF course his own bank, in
ly Endorsed, desires to collect the
money upon them at once, because its
profits are made by lending at interest
the money entrusted BIT by depositors-
But in city where there are twenty
or forty or more banks, it would be
great waste of time and Dor, besides
being hazardous, for each one to send
around a messenger to each bank to
collect what is due. To avoid this the
clearinghouse has been devised.
At a certain hour on every business
day messenger from each bank goes
to 1.-The clearing" carrying all the
checks against any and every other
bank in the city taken during the pre-
vious twenty-four hours. The checks
arc made up into separate packages,
and each has statement of the aggre-
gate amount due from the bank.
All the rest is a mere matter of addi-
ton and subtraction, which is done by
the clearinghouse clerks. The First
national bank has brought in checks
against other banks to the amount of
fifty thousand dollars; other banks
have brought in checks against the
First national to the amount of fifty
one thousand dollars. Then the First
national is debtor to the clearinghouse
in the sum of one thousand dollars.
Other banks are creditors. OF course
the debts and credits balance each
other to a cent The debtor banks
must Immediately pay. in money,
whatever they each owe to the clear
inghouse; the whole sum is at once
divided among the creditor banks, and
the clearing" is over.
Thus the claim by each bank against
every other bank in the city have been
adjusted at very little expense OF time
and labor, and the use of a small
amount of actual money. The checks
md drafts settled are called Eek
changes" is the balance"
In good years the exchanges at the
New York clearinghouse reach nearly
forty thousand million dollars q year,
or about ono hundred and twenty-five
millions on every bank day. These
vast accounts are settled by the shift
ing about, from day to day, of not
more than ten million dollars.
This shows what an immense saving
in the use of money the clearinghouse
makes The principle is applied to
other things beside banking. At New
York and also at Boston the brokers
have a stock clearinghouse. Certifi-
Gates of stocks take the place Of checks.
The broker who has bought five thou
sand shares and sold four thousand OF
Northwest" receives one thousand
shares from the clearinghouse. and
pays the money balance due on all his
transactions
But although the clearinghouse prin-
ciple is capable of wide application, il
is chiefly employed in the bankers
clearinghouse of this country 10 the /
number Of about sixty in the chief /
cities from Maine 20 Washington