The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1894-04-16
ABOUT CLEARING HOUSES.
Uses of an Institution Whose Work.
ings Are Not Understood by Many.

Youths Companion.
Several of our subscribers in different
parts of the country have asked us TO ex.
plain the principle Of the clearing house.
We comply with the requests the more
readily because the explanations in the en-
cyclopedias can be understood clearly by
those only who have a considerable knowl-
edge OF banking. We will start from these
facts: that almost every business and
the money which he does not need for
casual personal expenses on deposit in
bank; that he pays nearly all his bills by
ceives payments for the most part IN
checks drawn by those who owed 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
chant may receive each day large num-
Der of checks, some on one bank, some on
another. OF course, his own bank, IN whlcn
he deposits these checks, properly indorsed
desires TO collect the money upon them at
once because its profits are made by lend
ing at interest the money intrusted to 1t
nv depositors But in a city where there
are twenty or forty or more banks, IL
would be a great waste of time ana LABOR,
besides being hazardous, for each one 10
send around a messenger TO each bank 10
collect what is due To avoid this the
clearing house has been devised.
AT a certain hour on every business Gay
a messenger from each baEk goes TO tine
clearing carrying all the checks against
any and every other bank IN the city taK Hss
checks are made up into several packages.
and each has a statement or the aggregate
amount due from the bank. All the rest
is mere matter OF additlon anu ST; sup p
ton which is done by the clearlng-hopse
clerks. The First National Bank has
brought in checks against other banks 10
the amount of $4,000; other banks nave
brought in checks against the First Ma
tional Bank to the amount OF S9l,OOO linen
the First National is debtor to the clearing
house in the sum of $1,000 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 clearing
house: the whole sum is at once divided
among the creditor banks and the clear
ing is over Thus the claims by each bank
against every other bank in the city nave
been adjusted at very little expense OF
time and labor. and with the use OF a smali
amount of actual money. Inc checks ana
drafts settled are called Exchanges, and
the money necessary to complete the set
Element is the balance"
In good years the exchanges at the New
York clearing house reach nearly s4oOO.-
bank day. These vast accounts are settled
by the shifting about, from day to day, or
not more than $10,0C00OO. This shows what
an immense saving in the use OF money
the clearing house makes. The principle rs
applied TO other things besides banking. AT
New York and also at Boston the brokers'
have a stock clearing house. Certificates
of stock take the place of checks. The
broker who has bought 5000 shares ana
sold 4.GOO of Northwest receives loo shares
money balance due on all his transactions.
But although the clearinghouse principle
is capable of wide application, 1t is chiefly
employed in the bankers clearing houses
of this country to the number OF about
sixty in the chief cities from Maine TO