The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1912-07-20
TO STOP CHARGES
New York Investigates Plan to
Eliminate Clearing House.
Profit in Trade Would Offset
Loss on Outside Checks.
OTHER TOWNS GET ACCOUNTS
Many New York Firms Now
Use Philadelphia Banks.
Shows Fine Work.
OTHER TOWNS GET ACCOUNTS

July 20.-At least a month before
the committee of the lower house of
congress began it's socalled money
trust Investigations in this city a
searching investigation by a commit
tee of the clearinghouse association
into the question of inland exchange
had been begun. That investigation
was in. progress when the Pujo conn
mittee was in this. city. It may be
continued for some weeks
Inland exchange is the technical
name for checks or drafts deposited
in New York banl1S drawn upon banks
iIt other parts of the country upon
which the rules of the clearinghouse
association now require the New York
cry banks to charge established or
standard rates for the collection of
the items. 1t is the business which
one witness testified to the Pujo COM
uTfttes yields the New York city banks
a profit OF fifty millions year. This
testimony was corrected the next day
and the amount fixed, as the witness
said, by hearsay at twenty millions
Dry and extremely technical as this
subject Is 1T nevertheless contains
factors that are of great Importance
not emily to banking interests but to
trade and commerce throughout the
United States. The clearinghouse
committee has prepared long Hst
of questions which have been sent to
every bank in the clearinghouse as
ISOLATION That is for the purpose of
getting accurate and detailed informa-
ton from the managers of the banks
of New York respecting their exper-
fence in the collection of charges on
ott-of-tovTn checks. In addition the
bankers have been asked to answer
questions which relate to the exper-
fences as to the fairness of this policy
of charging for the collection ~
checks and also what the effect of the
T. v,Nx-T
for nearly fifteen years, upon trade, |
commerce and banking interests of
New York and of the rest of the coun- |
try, has been.
Some of the answers tell an extra
ordinary story. There are some banks
of New York which have found that
the daily expense for collection OF
checks upon New York city banks or
those banks within the metropolitan
district from which returns can be |
received within day, has been from
a hundred and seventy-five dollars to |
two hundred dollars. Apparently |
therefore some of the New York city /
banks find that it costs them from five |
hundred thousand dollars to six hun |
dred thousand dollars year to make
these local collections. Tha1 or
course. includes the interest lost upon |
the money represented by these
checks while they are in the course of
collection.
1t Is Not Guesswork.
This statement IS not SueSSWOrk- II |
is made by banks after a most thorough
auditing or actuarial investigation of |
this matter. This loss would seem to |
be almost prohibitive. And 1t probably |
would be prohibitive, so far as the al
lowing of credits upon the balances OF /
the deposits Of these checks is con- /
cerned, as soon as they are deposited |
tf it were not for the fact that the /
New York city banks can lend the |
money which these checks represent. |
In very busy times the TRANSACTIONS |
even mn but in dull times, when the +
hanks seek to lend money upon any I
rate of interest, the charge is heavy /
one
some of the clearing house officers
have been informed that there mas re-
Gently been a. disposition manifested
Nv a few of the Philadelphia banks 10
ci,.ree for the collection of inland
checks If this report be correct II
tends to confirm the beltef that IN
it has been discovered
@bat fine collection upon checks drawn
. oains+ country banks without charG-
inc exchange therefor, or, in other
words something for the expense OF
collection, does involve unprohtabIe
business.
II ia a broad subject and business, as
q whole, throughout the United States
Is interested in it, since sooner or later
either directly or indirectly the trace
"a "A commerce /
nestle and foreign, is reflected In the
transactions Of the New York Clearing
HOUSE association. The offices of the
association purpose studying the SUBJ
5ect from all points of view.
They will try to find out whether or
not losses banks may meet with III
they collect out of town checks free,
a flowing depositors of these checks in
slant credit balances for the money the
checks represent, are not more than
onset by the increase in business, in
trade in commerce, which the free col
lection of the checks would. in the
opfnion of leading bankers here, surely
cause.
Credit and High Financing.
The financing proposition which Pres
ident Timothy F. Williams, of the
Rapid Transit company has
laid informally before the public service !
commission, Is spoken of as a highly | |
ingenious and, many think. a highly {
creditable illustration of high financing {
In the best meaning of that term. 1t t
does illustrate the part which t
credit is now playing in some of the
greater financial undertakings of the
time The rapid transit commission /
seems to be favorably impressed, not |
only with the ingenuity with which this
plan has been worked out, but also I
with the satisfactory features which it
,ontaics.
The Brooklyn Rapid Transit company
must raise as much as a hundred mil
ion dollars with which to build and l
equip that part of the general subway !
system which this company is to con- {
xol {
In order to raise that money il is 4
,ital Of course, that any proposition ]
,e underwritten The security which t
5 70 lie behind this sum for the pay !
nent Of interest and principal is to be
! mortgage covering all of the present .
md prospective property. Upon this :
mortgage 5 per cent bonds for 100 mil T
ions of the company's issues are 10 :
tand and the underwriters WHO are |.