The trust companies kicked and protested, and almost, without exception, withdrew from the Clearing House; but, after the panic of 1907, the New York legislature passed a law requiring them to carry 15 per cent cash reserves.
On June 13, 1908, the association passed a resolution compelling all trust companies, who were members, to carry a cash reserve of 25 per cent, and on Jan. 16, 1908, the association for the first time in its history made a rule compelling all its members to keep a cash reserve of 25 per cent.
Every member of the New York Clearing House is required to furnish to the manager, weekly, for publication, a statement showing its condition, showing the average amount of loans, and discounts, specie, legal tender, notes in circulation and deposits. The capital and net profits are also given, this being the only association which gives the latter item.
Along the same line of legislation controlling the action or conduct of its members, the Clearing House committee, having plenary power to do so, passed a rule—determining just what every member and bank, clearing through members, should charge for collections.
The rule made some cities free, that is, there were no charges for collection made compulsory. Some cities were under a fixed charge of one-tenth of one per cent, and others under a fixed charge of one-quarter of one per cent. Upon April 3, 1899, this rule became obligatory, and if any member violated it, the penalty was $5,000 for the first offense; for the second offense it might be expelled from the association.[1]
Mr. Laboringman: That is precisely the same rule we have in our Union, only our limit is not so high. We fine a member $5.00 for his first offense, and for the second offense we take away his card. By Jove, that is a hot proposition. And these are the very fellows who are always cussing us because of our Union rules.
Mr. Lawyer: I want to tell you something else, gentlemen, that combination among the banks is clearly in restraint of trade and in violation of the Sherman Anti-Trust Law. Anybody who wants to can bring those banks to time.
Mr. Banker: Now, gentlemen, don't you perceive that this institution, step by step, has evolved its own laws, or rules of action, slowly developing its present system, and regulating and controlling the conduct of those outside institutions which enjoy its privileges? The story of this Clearing House is the record of all of them in principle. They are, each and every one of them, self-centered, self-contained, and a law unto themselves.
The operation of the New York Clearing House is practically that of all the others. Its room is sixty feet square. Four rows of desks occupy the floor. Each member has its own numbered desk separated from its neighbors' by a wire net work.