the Clearing-House sheet, which can, of course, only show their debits, as their holdings against this bank are not yet known. The next morning at ten o'clock the clearing clerks of the various banks meet at the Clearing House, and after presenting their bank's Clearing-House sheet to the Clearing House, exchange the checks of their respective banks, as is described in the article on the Clearing House.

The clerk of the Clearing House then gives to the clerk of each bank a statement, showing the net total either due to or owing by his bank from all the other banks. In case the bank is a debtor this amount has to be paid in by one o'clock; and in case it is a creditor the amount due is paid over to it by two oclock.

The clerks after this exchange of checks return to their respective banks and the different checks are charged up to the various drawers thereof, and finally returned to them as before explained.

000

CHAPTER V.

New York Clearing House.

LOCATED at present in the modest four-story brownstone building, at the corner of Pine and Nassau Streets, is the "New York Clearing House Association," formed by the principal banks of this city, for the purpose of effecting clearances or exchanges of checks, drafts, etc., between each other. The association is now erecting a new home on Cedar Street.

This association was formed in 1853 with a membership of fifty-five banks, whose capital aggregated $47,000,000. Its present membership consists of sixty-six banks with an aggregate capital of $62,622,700 and a surplus of $71,046,800. While this increase has not been as rapid as might have been supposed and perhaps as has taken place in some other directions, it should be borne in mind that the strength of a bank or a banking institution does not entirely rest upon the amount of its capital nor even of its surplus, and when it is considered that this association was organized by the fifty-five strongest banks in the city, and it is remembered that these banks, with but few exceptions, still retain that leading position, and that only institutions of the very highest character are admitted to membership, the wisdom and conservatism displayed in thus restricting the membership will be appreciated. It may be said that in addition to the Federal supervision in the case of national banks, and the State supervision in

the case of State banks and trust companies, all members of this association are subject to the almost daily supervision of committees appointed by, or officers of, the Clearing House.

The conditions of membership are the payment of an initiation fee ranging from $5000 for banks of a capital of half a million to $7500 for banks with a capital of five millions. Further, each member irrespective of capital pays yearly $200, besides which there is a charge varying from 35 to 40 cents on each million dollars cleared.

In addition to the examination spoken of, each member must file weekly a statement of loans, specie, legal-tender circulation, deposits, etc.

The officers and committees of the Clearing House Association are chosen from the banks by which it is formed. The Assistant Treasurer of the United States, owing to the importance of the clearings of the SubTreasury, is a member by courtesy, as is said by way of being polite, but largely for the convenience of the banks and to avoid individual presentation of claims against the Sub-Treasury.

This association is designed to provide a place and method by which the risk, expense, and loss of time. necessary in the presentation of the demands of one bank against each of the other banks, members of this association, and of the claims of each of those other banks in turn against it and against each other, may be avoided. The method by which this is accomplished in brief is by the presentation by a bank of its entire demands on all other banks to the Clearing House, with which the bank is credited. The Clearing House receives from all other banks, members, the claims against said bank, and if the claims of said bank are in excess of the claims against it, then the Clearing House pays to it such excess; in case the demands against such bank are in excess of its claims against other banks, then the bank must pay the excess

to the Clearing House, the Clearing House distributing such excess among the banks to which it may be due.

In England, as early as the latter part of the eighteenth century, the necessity of such institutions was recognized, and in fact in several of the cities of England clearing house associations were then established.

The great utility of such an institution need only be mentioned to commend itself immediately to any one acquainted with finance, but perhaps an illustration would not be amiss. Not long since one of the larger members of this association presented to it demands against the other members of the association amounting to about $4,000,000, and these other members presented to the association demands against it only fifty cents short of the amount of its claims against them. Only the balance between these two amounts was paid over, the two principal amounts being set off against each other; a transaction of $8,000,000 was thus accomplished by the set off of credit against debit and the payment of the balance of fifty cents.

The machinery by which these exchanges or clearances are accomplished is as follows: The manager and his staff are in their respective positions on the platform at 10 A.M. This platform is situated at the western end of the large room on the third floor, in which room are assembled at the respective desks allotted to them the "delivery and "settling clerks" of the various members of the association. Each delivery clerk brings the demands held by his bank against the other members, done up in separate parcels, this work having been accomplished the day before by the assistant tellers in his bank. The settling clerks now present to the manager of the association a memorandum giving the amount of the total demands against the other members, with which amounts the bank represented by said settling clerk is credited on a proof sheet kept by the "Proof Clerk."

The clerks now go to the respective desks allotted to their banks on one of the three rows of desks located in this room, and the actual clearances begin as follows: The delivery clerk at desk No. I delivers to the settling clerk of No. 2 all demands of No. 1 against No. 2, obtaining a receipt therefor. At the same time No. 2's delivery clerk has delivered to No. 3's settling clerk the demands of No. 2 against No. 3, upon his receipt. This mode of settling prevails throughout the room until each member has presented his demands against every other bank and every other member's demands have been presented against it, which usually consumes about twenty minutes. After these settlements have been effected the settling clerks send the result of the demands against their respective banks on slips to the proof clerk by whom they are entered to the debit of such bank. The proof clerk now adds up the total debits and credits, which should, of course, agree, because what is a credit of one member is a debit of another, and vice versa. In half an hour more the differences between member and member are announced. Those members whose credits are in excess of their debits are termed creditor banks and those whose debits are in excess of the credits are termed debtor banks. The creditor banks collect, as soon as practicable, after the settlement of the debtor banks, the amounts due them, which amounts, of course, have to be paid in by the debtor banks, and which amounts these debtor banks are required to pay in cash, not later than half-past one.

To give an accurate idea of the importance of this Clearing-House Association, it may be interesting to note that while the clearings of the New York Clearing House for the year ending December 31, 1894, amounted to $24,387,807,019.92, although for the last ten years the average annual clearances have been $35,000,000,000, those of all the other clearing houses outside of New York amounted to less than $21,000,000,000. It is estimated