Evening star., 1928-08-26
RY I. A. FLEMING.

BY I. A. FLEMING.
Clearing house associations are not
only indispensable 10 successful banking
but they are also of real benefit to the
business community and protection to
depositors.
Business and private interests are
served by the WatChful care exercised
by these associations over the condition
of member and non-memher institu-
tions.
In this city during the last 10 years
the clearing house officials have forced
voluntary liquidation and retirement
from business Of probably a dozen banks
and this, too, without loss to the de-
p0sitorS.
Working in full harmony with the
controller Of currency they have sensed
the danger, having actual knowledge OF
the banks involved. knowing from an
examination of Its assets whether its
assets are sufficient to care for the de-
poSitors. the clearing house generally
suggests liquidation as an alternative
to immediate rccciVcrShlp, avoiding
publicity III the matter by the sale OF
the banks assets TO another bank, pro-
ceeds to care for deposits. anything ad-
ditiOnal above deposits if any, to 60 10
the purchasing bank, which assumes
payment OF depositors,
The controller Of the currency has
power to order an assessment If there
Is a shortage Of assets to meet demands
Of dcpoSitors. In one case in this city
an assessment Of 100 per cent was made
on the shareholders of a liQuidated
bapk
The clearing house association can
force liquidation by refusing to clear
the checks of a bank, thus causing sus-
piCion and the shifting of business to
other banks.
Working Harmony.
The local clearing house functions
beautifully and in harmony with the
District Bankers Association. The for
mer Is the enforcing body. the latter
the advising committee. Together they
are revolutioni2ing banking for the good
OF banking and business man--sh0Wing
him more service and convincing him
at the same time Of the necessity of
small service charges.
There is a clearing house association
in every city of any size. Members are
generally banks chartered under the
national bank act.
In Washington national banks, the
American Security and Trust Co. and
the Washington Loan and Trust Co.
are members. National banks have
long cleared checks for members
and the two trust companies enjoyed
the same privileges before Joining.
Non-members must carry satisfac-
tory deposits with the member banks TO
provide for the business cleared. Nom
members must do their business so far
AS check clearing. transfer of money
IN large or small amounts, with member
banks, including the making of call
loans and so forth.
Through the Federal Reserve system
par collection Of checks has become
general. the system assuming the free
transfer of money from one city to an
other in this country. promptly by wire
and without charge whatever for
services.
Big Saving to Banks.
This free transfer Of funds Is great
service 10 banks. Formerly 1t was an
expensive business to send money from
New York to Frisco or the reverse. The
cost was generally the express COM
pany's charge. plus insurance. II the
transfer OF cash was very heavy the
exchange rate was usually at premium
for Western money or credit in the
West; the reverse when the demand
was for New York funds. There were
high rates on exchange or credit in
New York. From Chicago the rate
was $50 on 1000.
II tooks days. occasionally more
than a week, for collections TO be made.
Today they are practically instantane-
Gus.
All banks. members and non-mem-
rtnf1N Iva
all cities. may avail themselves OF the
free transfer and collection of items
and rediScount privileges, but nom
members must act through member
banks.
There are II regional Federal Reserve
banks and a number Of branches with a
great private wire system through
which transfers are made III practically
no time, credit being Immediately
given To banks named as entitled
thereto.
Clearing House Check Wrongs.
Unanimous action by banks can only
be taken through the local clearing
house. Arrangements have been made
looking to bank examinations by pri~
vate official in the employ of the clear
Ing house, Checks can be given to dupli~
Of credit information without any state
ment of the amount of the borrowings,
protection against worthless advertising
schemes and where solicitors commits
sions are nearly the total of the price
paid and the hencf1ciary's share not
much Of anything. Cooperation and
advertising at n prorated cost has been
made effective III Washington and in
some other cities
Check kiting. long a worry 10 banks
by people who want TO use a bank s
money, has been largely weeded out. and
local banks now work as a unit in
closing accounts Of repeated issuers Of
dishonored checks.
Industrial Situation.
The general trade and industrial
situation Is pictured by FRANK Greene
Of Bradstreet's as somewhat tWo~sided IN
his review Of August business for Ma
tons Business Magazine. Cheerful fea-
lures. however. seem 10 predominate,
With respect 10 trade on the favor
able side there was a sustained strength
Of buying demand or production OF au~
tomobiese and their accessories. this in
Guiding tires and gasoline: steel prod
ucts Of nearly all kinds, Gamers sup
plies. agricultural implements shoes and
silk fabrics.
July failures were less than for sew.
eral years past. and the first monthly
increase In car ioadngs shown over the
like period Of the preceding year for 10
months past were additionally favorable
happenings The furniture trade seemed
Financial High Liel