Daily capital journal. (Salem, Oregon) 1903-1919, 1907-11-08

labout clearing houses ana clearing
house certificates It might be we'll
to rehearse what n clearing house IL
and how II Ia conducted to aid the
commerce of today.
Ordinarily It is merely a part of
the smoothly running mechanism OF
exchange. outHlders have no occa-
sion to visit 1t and the only token
of its existence Is the stamp that You
find on the back of some checks
which your bank returns TO you as
voucher. But in times OF financial
strlngency the clearing house al once
looms, into Importance as an asso-
citation of banks by which they are
able TO pool their resources and so
continue to take care OF Legitimate
demands OF business.
Briefly, the clearing house Is
device by which banks are able 20
balance their accounts against each
other and so to avoid the necessity
OF the transfer OF unnecessary large
sums OF currency. Suppose. for In
stance, checks are drawn on a CO..
tain bank TO the amount 100000
were deposited In day In another
Institution. And suppose on the
same days checks aggregatlng $780,
900 had been drawn on the bank
whore the 100000 had been do
posted, and cashed at another bank.
II there were no clearing house the
first bank would have TO send $780,
900 In currency TO the second bank
and the Necond bank In return would
have TO send $4,000 in currency
back 10 the first. All this trouble
Is supernuous since II would be pos
sIble TO accomplish the same result
by letting 500 900 OF the Indebtedness
on each side be Cancelled and by the
first bank sending $4,000 or the
balance OF It's Indebtedness TO the
second.
II is this principle OF permitting
banks TO cancel their Indebtedness 10
each other and to pay only the bal
ance In cash that IA worked out In
the clearing house. The extent 20
which this devise saves labor may
be inferred from the fact that on one
occasion IN May. 1909. the Chatham
bank OF New York was able TO settle
It's claims on other banks amounting
10 more than s1.250. 900 by receiving
through the clearing house ten
conta.
Here Is the way the clearing house
works: You pay your grocer s25
say. with a check on a certain bank.
He has an account with another
bank and deposits the check there.
In the course OF the morning checks
on all tho other banks OF the city
are deposited with the bank where
the grocer deposited the check given
by you. So this bank sorts the
checks all out and sends them 10 the
clearing house at 1880 which Is the
close OF the daily session There the
various packages OF checks are pre-
sented TO the different banks 10 which
they belong. Az the same time each
OF these banks presents 10 the FIRST
bank sending IN the different bunch
es OF checks a bundle for II which
has been accumulated In their days
business. Each bank has its claims
listed against other banks. The diff
ference between the fgures shows
the amount due from other banks or
TO be paid them. The manager or
the clearing house r. supplied with
these figures and makes out the or
ders OF the various banks on eacn
other 10 settle the uncancelled IN
debtedness,
Meanwhile the checks are being
stamped by the clearing house and
returned 10 the banks on which they
were originally drawn SO eventual.
iy YOU get your S25 check back with
the stamp OF the clearing house and
the bank which sent II there.
In cities where clearing houses ex-
ist al the present time during the
financial troubles the clearing house
balances are settled by certificates
instead OF cash. These certificates
are guaranteed by gllt-edged securi
ties and are In the nature OF tempor-
airy loans made by the associated
banks TO the individual institutions.
They are proving useful In relieving
the demand for cash leaving mora
currency available for use OF the
banks customers. The clearing
house issues daily statements show
ing the amount OF checks passing
through the house on that day, Other
checks do not figure ia II. For In