Clearing House

In commercial law. an office where bankers settle daily with each other the balances of their accounts. Morse, Banks, 450.

An office where bankers settle daily with each other the balance of their accounts. The origin of the system is said to have been in Edinburgh; at least the bankers of that city so claim; but the earliest record of one (and that is not clear as to date) is that of London, founded in 1775, or possibly earlier. It was started in the increased in usefulness so much as to require rooms, which were procured in Lombard Street, and a system was rapidly developed of exchanging checks and other securities to reduce the amount of actual money required for settlements. In this country such associations were established in New York in 1858, Boston in 1856, Philadelphia, Baltimore, and Cleveland in 1858, Worcester in 1861, Chicago. and since that date the system has. extended to most of the cities in which there are several bank" also exist in the continental countries of Europe. Most of these associations are unincorporated, but in Minnesota there is an act (March 4, 1893) for their incorporation. The Clearing-House Association of New York consists of all the incorporated banksprivate bankers not being admitted, as in London. Two clerks from each bank attend at the clearinghouse every morning, where one takes a position inside of a counter at a desk bearing the number of his bank, the other standing outside the counter and holding in his hand parcels containing the checks on each of the other banks received the previous day. At the sound of a bell, the outside men begin to move, and at each desk they deposit the proper parcel, with an account of its contents— until, having walked around, they find themselves at their own desk again. At the end of this process the representative of each bank has handed to the representatives of every other bank the demands against them, and received from each of the other banks their demands on his bank. A comparison of the amounts tells him at once whether he is to pay into or receive from the clearing-house a balance in money. Balances are settled daily. In London the practice of presenting checks at the clearing-house has been held a good presentment to the banker at law. It is not usual to examine the checks until they are taken to the bank, and if any are then found not good they are returned to the bank which presented them, which settles for such returned checks. In this country when a check is returned not good through the clearing-house, It is usually again presented at the bank. To accomplish this purpose of settling daily balances was the original and still is the principal object of a clearing-house, whatever differences of method or detail may be found in different cities. The mode of proceeding in Philadelphia is described in Crane v. Clearing-House, 32 W. N. C. (P; and Philler v. Yardley, 62 Fed. 645, 10 C. C. A. 662, 25 L. R. A. 824; and that of London in 5 Mann. & G. 348, 6 Scott, N. R. 1, 12 L. J. C. P. 113. The original purpose of a clearing-house — the exchange of paper payable by the several banks and the settlement of the daily balances between them — has undergone a gradual but very extensive expansion, in the larger cities they have become to some extent financial regulators and the medium through which in times of financial disturbance there is attained concerted action by the banks of a city. In the panic of the New York clearing-house issued "clearing-house certificates" representing the deposit of securities; these could be used by the banks to sett ring-house bah Such certificates are held valid, and suit may be brought by the clearing-house committee upon notes included in the collateral deposited by a bank for the purpose of taking out certificates; Philler v. Woodfall, 32

An _ institution organized by the banks of a city, where their messengers may meet daily, adjust balances of accounts, and receive and pay differences.

The object of a clearing-house association is to effect at one time and place the daily exchanges between the banks which are members of the association, and the payment of the balances resulting frota such exchanges. 2 Sending a note through the clearing-house is not a formal demand for immediate payment made during business hours, but it is equivalent to leaving the note at the bank for collection from the maker on or before the close of banking hours.' See Loan, Certificate.