CLEARING HOUSE

a branch of banking established by bankers for the clearance or balancing of checks payable to or by them. All important financial centers have their clearing houses. Their operation consists in offsetting daily check credits against check debits or vice vers a, and the resulting balance in favor of or against a bank sums up its transactions for that day. The clearing system is an outgrowth of the extensive use of negotiable paper in the form of checks. The vast number drawn daily could not be pone collected by the ordinary method, and resort was therefore made to the system of clearance Ff now established as.an integral part of the banking busine . The object achieved is a daily settlement of obligations between banks without the need of paying actual money to any extent. New York, for example, the balances payable in cash seldom amount to more than 5 per cent of the aggregate claims settled. A’ person who receives a check pays it into his bank. It becomes one of scores or hundreds of checks his bank receives for collection from other banks. Instead of seeking collection b direct calls on such banks, the ban pa es the batch of checks through the local clearing house, where its representative finds these other banks have presented checks for clearance against it. A routine debit and credit settlement results. The balance drawn in adjustment represents a settlement by a single check or cash payment of a multitude of daily transactions that could otherwise have occasioned an infinity of work, not to mention confusion and the chances of error. } The federal reserve banks operate as clearing houses for member banks in the federal reserve system. The former also utilize the clearing house principle in settling with each other their weekly obligations to avert the despatch of large amounts of gold and currency from bank to bank. Each reserve bank telegraphs to every other reserve | bank the amount it owes to the latter. The totals are thereupon offset and the balances struck by debits and credits. Back of the weekly clearance is a gold settlement fund held in Washington, each bank keeping a portion of its gold reserve in the form of U.S. gold certificates on deposit in this fund. By the weekly adjustments a change is effected in the Adc 3 of the gold among the ete though it is not physically disThe transactions of the New York Clearing House A ociation, mainly composed of 18 national banks, 11 state banks, and 12 trust companies, may cited to indicate the volume of mode clearing operations. In 1922 there were daily transactions of exchanges amounting to $706,378,760 and daily balances struck of $69,644,619. In the year the total of exchanges and balances reached Clearing houses are useful barometers of busine conditions. The le checks come in for clearance, the le busine is being transacted. Expa nded clearance operations therefore point to bus in revival.;