The manager is the most important officer; he is appointed by the executive committee, and is usually reappointed year after year; he commands a good salary in the larger houses. He has direct charge of all the business at the clearing house, under the executive committee; he supervises the employees of the clearing house as well as the settling clerks and messengers from the member banks while they are in the exchange room; he imposes fines, makes and keeps the records of clearings, and prepares the reports.
The executive committee, composed of three to five members, all experienced and expert bankers, elected annually by the members, is the most important committee and has practically unlimited powers in the direction of clearing house affairs. Some of its functions are sometimes delegated to other committees, as the examination committee, conference committee, admissions committee, exchange committee, arbitration committee, and loan committee. Such division of business among committees is, of course, most extensive in case of large houses. The committees are elected at the annual meeting of the members.
Clearing house associations are either incorporated or volun tary; the voluntary association prevails in the United States. Opinion varies as to the advantages of incorporation. Either the articles of association, if it be a voluntary organization, or the charter, if incorporated, will detail the purposes, officers, and government rules and regulations of the association; these will be added to from time to time by a set of rules and regulations, defining in more detail and specification the conduct of the house.
Function s The general functions of a clearing house are specified in the articles of association. The major function—the one performed by all clearing houses and giving them their institution and name —is the adjustment of the mutual obligations of the members. Another is to adopt such safeguards, rules, regulations, and con veniences as may be desirable and lawful, in and governing their relations with each other, with banks and trust companies in other localities, with the national government, and with the public in general. The safeguards adopted are rules as to proper reserves, loans, clients, till money, advertising, and banking practices. To see that these rules and regulations are carried out, a special examination committee has arisen in some clearing houses.
The rules relating to their relations to each other and to other banks and the public are to provide mutual help or to curb cut throat competition and establish uniform practices; for example, to arrange for joint loans to needy members to settle balances, to publish weekly and monthly reports of the conditions of the members and of the clearing house clearings and balances, to fix uniform rates of interest on deposits, to fix uniform exchange and collection charges, and regulate, or provide facilities for, handling transits and country collections, to provide facilities for handling collections of city items not collectible through the regular ex changes, to provide for the issue of certificates of deposit for use in settling deposits, etc. Occasions have arisen where the clear
ing houses, particularly the New York Clearing House, have sup ported the United States Treasury in times of distress by loans' co-operation. In fact, before the establishment of the federal reserve system the New York Clearing House was regarded as the palladium of our financial system.
The New York Clearing House Clearing houses arose by accident in London about 1770, when bank messengers got into the way of exchanging their checks at certain coffee houses instead of presenting them at the windows of the bank. A similar practice arose in Wall Street about 1850, and in 1853 the New York Clearing House was established by 52 banks. Banks in other cities fast followed New York's lead and established clearing houses: Boston in 1856, Philadelphia in 1858, Chicago in 1865, St. Louis in rS6S, etc. There are in the United States upwards of 225 regularly organized clearing houses and many other informal ones.
The table on opposite page, in quinquennial averages indicates the growth of the clearings of New York banks and of the rest of the United States.
The New York Clearing House is the oldest, most completely organized, largest, and most influential clearing house in the United States, and therefore warrants some special paragraphs. The association at present (May, 1921) has 5i members, which include national banks, state banks, and trust companies. The Federal Reserve Bank of New York and the clearing house col lection department also make exchanges at the clearing house, making 53 clearing institutions. The constitution makes provi sion for clearing for non-members; the non-member must have been actually doing business one year and have been approved by the clearing house committee, must pay to the association $1,000 per annum for the privilege, and must submit to the same exam inations as are required of members. The member bank through which the exchanges are sent is the duly appointed agent of the non-member, and the member is held liable to the same extent as for its own transactions. The non-member must make a weekly report in prescribed form to the clearing house, and must keep the same cash and deposit reserves as are required from the member. The members handle these non-members' clearings for the profit they make out of the account. The checks of the non member may arrive, as shown in Chapter XXXI, in the mail teller's department, put up in packages one for every member bank, and are entered into the members' exchanges in the as sembly rack. There are now (May, 1921) 9 banks and trust companies, not members of the clearing house, which make their exchanges through banks that are members.