Elk City mining news. (Elk City, Idaho) 1903-1913, 1907-11-30
Is bank required by law to pay cash

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demands for currency than it can meet,
and SO finds it necessary to borrow tenn
porarily from some other bank. The
large customer, familiar with banking
would think nothing wrong
if his bank could not Immediately sup
ply him with an extraordinary amount |
of cash..
How much of banks business is
done with cash?
Such an insignificant portion that lit
tie attention is paid to it in ordinary
times. 4
Why are the banks unwilling to pay
cash on demand now?
Because of general scarcity of small
currency throughout the country.
Why is currency scarce?
Because business has been very
active, keeping more than usual in
active circulation; because people are
prosperous and carry more than usual;
and because the recent financial up
heaval in New York started a move
ment among timid people to withdraw
money from the banks and hoard it.
Why do some banks issue cashiers
checks payable through the clearing
house?
To avoid paying out currency and ex-
hausting their cash reserves, and to
furnish temporary substitute for cur
rency. These checks will be received
the same as money by merchants who
will re-deposit them in the banks, and
when the need for them passes they
will be cancelled by the bank,
What is a cashiers check?
1t is check issued by a bank on
itself.
What is meant by Payable through
the clearing houseY'
When a check thus stamped is de-
posted in some other bank than the
one issuing it the receiving bank cannot
collect the cash on it, but it must be
settled through the clearing house.
What is clearing house?
An organization for the purpose'of
facilitating settlements between banks.
Each day every bank in the clearing
house takes all the checks on other
banks that it has received to the clear
ing house, where an exchange is made
between the banks and the balance due
is settled. Each bank has a number in
the clearing house. If bank No. goes
in with checks on other banks aggre-
eating million dollars, and other banks
go in with checks amounting to So, 200,
900 on bank No. 6, the latter bank owes
balance of 5000, 900 to the other banks
which, in normal times, it would pay in
cash or in draft ON an eastern bank.
What is a clearing house certificate!
1t is a note issued by the clearing
house, based on securities put up by
each bank, and is used, instead of cash,
to settle balances between banks. Sup
pose bank No. Z finds itself indebted tc
bank No. 9 for $50, 900 today. A month
ago the debt would have been paid ii
cash. Now bank No. takes securities
worth $40, 600 to the clearing house as
sociation. A committee passes on the
value of the securities, and, finding
them to be good, issues certificate rol
100000 bearing interest at per CEN
and transfers the certificate to banl
No. in lieu of cash. Tomorrow the
balance may be. the other way. Banl
No. takes up the certificate, pays ;
days interest and if the balance in it!
favor is greater than the whole amour
it must pay, receives certificate
against bank No. 9. The interest wa
put on to make all the banks anxious tt
take up certificates against themselve
as fast as possible.
Why do Kansas City banks refuse t.
pay currency except in small amounts
If they had not they would have beer
called upon to cash drafts on other cite
to amounts running into the million
every day. They could not have stoo'
it after the New York, Chicago and st
:. Louis banks refused to ship currency t.
take up their own drafts. No one cit,
could have furnished money for th
whole country
How long will this condition last?
The best bankers say conditions ar
improving rapidly.