The Birmingham age-herald., 1908-06-07
PEEP
 INTO WALL STREET What the Clearing House Does and Why It Was Started -SUFFRAGETTE CAMPAlGNING C Many Amusing Incidents at Their Street Meetings in New York.
 Why We Have Fake"
 Paintings.
.SUFFRAGETTE CAMPAlGNIN C
BY SEWELL HAGGARD.

New York, June 6-To the average per- son, the clearing house. which has grown tc be the most important feature of bank ing business, is a gigantic mystery, so it may be interesting to explain just what it is. To make the explanation clear, it is necessary to go back to the time when people hoarded their money in their stockings.
 Diverse systems of banking carrying diverse consequences to the depostor had afflicted the country, and there were not a few who had but little use for banks anyhow and chose to keep their funds at home, where they coulo always be ob- tainable. These chary ones, then, want ed to have their assets in a thoroughly liquid" state. To do that they took the chances of fire and robbers and rats kept their deposits in their closets and made their clearances over their own hearth stones. It was a system that had certain advantages, but was not without it's draw lacks. If one leaves out of consideration the element of safety in the stocking bank, there is still the objection of in- convenience when it comes to applying such a system to the eXigencies of even the ordinary kinds of business. It in- wolves carrying a great deal of money about in ones clothes, which may be not only uncomfortable but unsafe. It in- wolves postponing collections from ones fellow traders until they happen to have a sufficient amount oe funds in their pockets to settle up.
 So it is not difficult so see how the system Of letting a bank make the change and attend to the other bothersome matters between the man who pays and the man who receives became a popular one, and, in measure as it commanded public confi- dence, superseded the stocking theory of banking. It was far simpler to draw a check than to lug around the ready cash, and far safer as well, for whole boollful of checks would not avail a thief unless he succeeded in fooling somebody on ones signature, and if fire or the rats happen to consume the check book there is no further loss to anybody than the cost of the printed paper.
 It was only natural that the banks should soon begin to bear the same rela- lion to one another that their customers bore to them. The check of every bank was a certificate of its own indebtedness, good so long as the person to whom it was rendered believed that the individual who signed it had the funds on deposit and that the bank itself was sound. But, however readily accepted, the check or John ID. Rockefeller on J. F. Morgan would have no value unless it's handling meant in the end that the actual cash was to be paid out to the person to whom the debt was due. So the banks, with their steel and concrete vaults for their cup boards kept their funds in their stockings and made their clearances over their own counters sending forth their messengers in person with cash to pay those who owed and would not come to collect. Hence the establishment of the clearing l house. For each bank to keep on hand l all the cash needed to care for all the 1 demands of depositors every day meant | that principally all the assets repre- | senting active accounts must be available at an instants notice, for it would not | do to delay a depositor or creditor calling | for his money longer time than was | required to bring out the currency to the | counter and count of the amount in the | denominations required.
 There was an element of waste and an | element of danger in such situation ss this. The element of danger was that the l banks, obliged to keep so large an amount l e cash on hand, would have to shut | down on their customers whenever there | was the slightest contraction of money, 1 lest they find themselves unable to mane | good. The element of waste lay In the | limitations placed upon the investments | which the banks might safely and profit | ably make of the funds in their charge, | Il figured on the net instead of on the l gross basis To illustrate: Suppose a bank has de- mands on given day for the payment | of 5000 over it's counter by the pre- | sentation of it's checking depostors and | individuals Suppose that it's checks ag- l gregating $50O,000 are sent to other banks | oy their depostors for collection, and that 1 checks on these same banks for $45O,O00 | gre deposited with the first bank for col | lection. If the bank is making it's own l clearings, it has to keep on hand for i'm mediate use, in addition to the S5,090 | reeded for over-the-counter payments, the | S5OOOOO required for all O. its checks sent | to other banks for collection, in spite of | the fact that before the day is over S45O,- | coo will come in from these other banks, | making the net result of the days opera l tions a debit balance of but $50,000 as re- | gards the rest of the banks and cash | requirement of but s125,OO0. It went with l out saying that modern business ingenu- | ity, which has found it's chief expression l in the elimination of waste, would find | means to overcome so cumbersome and l uneconomic a situation. The clearing | house was the result. And with the clearign house came mu- | rlal confidence based upon information. l The member banks, first disclosing to |
 
 day, later recognized the wisdom of mak- | ing a weekly confession of condition Side 1 by side was maintained the right of the l clearing house to go in and make an ex- | animation at any time of a member | bank for the clearing house undertook | 10 take from each bank belonging to it a | statement of it's claims against every oth- | CT member bank, to balance those state- | ments, collect the balances from the debit | hanks and turn the credits over to the | hanks entitled to receive them.
 It was back in 1893 that the clearing | house first demonstrated that it was m | engine of safety as well as convenience. l In the panic of that year the people were | forced to withdraw so much of their de- | posits that there wasn'. enough money | to go around among the banks. The | clearing house, therefore, eliminated cash | exchanges It's procedure was to eliml- | nate entirely the exchange of cash De- tween the banks in settling their balances |