Readings in Money and Banking / Selected and Adapted

by Chester Arthur Phillips

But the times were not ripe for the scheme thus proposed. Mr. Gallatin was thinking in advance of the age. In time, however, the question began to be more generally discussed. For nearly a year it was under consideration, and finally it was deemed advisable to call a meeting to take decisive action upon it.

On August 23, 1853, 16 presidents, 1 vice-president, and 21 cashiers, representing 38 banks, assembled in the directors' room of the Merchants' Bank, and at this meeting a resolution was passed providing that "a committee be appointed to procure or hire a suitable room in or near Wall Street, for the purpose of holding meetings of the officers of the city banks; that the said committee be requested to submit a plan, at an adjourned meeting of this body, to simplify the system of making exchanges and settling the daily balances; and that when a room is procured or hired for the above purpose, the presidents or cashiers be requested to meet weekly until a plan is agreed upon." In compliance with this request, the committee presented a plan for the daily settlement of balances, at a meeting held on August 31, 1853, which plan was amended so as to provide "that a room be procured for that purpose, sufficiently large to afford suitable accommodations."

On September 13, 1853, the scheme was adopted and the committee was "clothed with full power to hire a room, appoint a manager and clerks, and make all the necessary arrangements to carry the plan for a clearing house into effect." The date for beginning operations was fixed for October 11. Accordingly, on the appointed day, the representatives of the banks, members of the association, met in a room which had been procured in the basement at No. 14 Wall Street, and made the first exchanges. The total clearings on that day were $22,648,109.87, and the balances were $1,290,572.38. These clearings have since been eclipsed by over $30,000,000 in the totals of a single bank.

The clearing system in America was thus fairly launched, and from that time forth its success exceeded the expectations of even its most ardent projectors. The association consisted at that time of 52 banks, banded together for their common good, which, as they then conceived, consisted solely in the exchange of items and settlement of balances at a uniform time and place. For nearly a year the operations were conducted without a constitution. The adoption of such an instrument was opposed, on the ground that it was not needed and might lead to a dangerous concentration of power in the hands of a few managers, who might use it for personal aggrandizement, or for the exercise of an arbitrary supervision.

MEMBERSHIP AND ADMITTANCE FEES AT NEW YORK

[124]The association at present (1909) consists of 50 members[125] (32 National Banks and 18 State Banks) and the United States subtreasury located at New York. The latter makes its exchanges only at the clearing house, its balances being settled at its own counter. It has no voice in the government of the association, and pays a nominal sum for actual expenses. The privilege which the subtreasury enjoys of making its exchanges through the clearing house is a matter of great accommodation both to the subtreasury and to the banks. The New York post-office clears through one of the members, but renders no compensation to the association for the privilege.

The membership of the association since its organization has been constantly changing, owing to the admission and expulsion of members and voluntary withdrawals, as provided by the constitution.

The association began with 51 members, but by 1858 the list had declined to 46, the lowest number in the history of the clearing house. A membership of 67 was attained in 1895.

On February 28, 1854, the Bank of the Union was expelled and the clearing-house association was authorized to return to it whatever amount was necessary to offset its advances toward the expenses of the clearing house. In the following December the Empire City Bank was expelled and a similar resolution was passed but in no case thereafter were any such refunds made....

The constitution is very explicit in its terms governing the admission and conduct of members. Applicants are first considered by the clearing-house committee and referred hence to the committee on admissions. The latter committee, if, in its opinion, after a careful examination, the applicants are qualified for membership, refers them to the association for final action, a three-fourths vote of those present being necessary for admission. Banks may be elected to membership at any meeting of the association, but before being considered by the clearing-house committee each applicant must be shown to have an unimpaired capital or an unimpaired capital and surplus of at least $500,000. Each new member is required to signify its assent to the constitution, in the same manner as the original members, and pay an admission fee, according to capital, as follows: A bank the capital of which does not exceed $5,000,000 must pay $5,000; a bank the capital of which exceeds $5,000,000 must pay $7,500. Any member increasing its capital is required to pay in accordance with those rates.