As soon as checks are received by the reserve banks they are credited at par, subject to collection. They do not become available for withdrawal or as reserves, however, until they are actually collected. Each re serve bank publishes a table showing the time required to collect funds on the various banks. The time varies all the way from immediately to eight days, de pending on the location of the reserve bank and of the bank upon which the check is drawn.
Member banks can maintain with the reserve banks funds with which to pay their checks, in the following ways : (1) by depositing checks against other banks, (2) by shipping currency, and (3) by rediscounting.
During the month from October 16 to November 15, 1917, the average number of items handled daily by the twelve reserve banks was 325,690 and the aver age amount cleared daily was $283,938,810. Clear ings were made for 7,826 member banks. Checks were received for collection on all member banks and on 9,210 non-member banks which had expressed their willingness to pay checks at par.
9. Advantages and disadvantages of the clearing advantages and disadvantages of the re serve clearing plan are stated clearly in a letter sent out by the National Association of Credit Men to its members. A part of it is quoted below.
The advantages as summarized are: 1. Direct and prompt presentation of checks.
2. The elimination of exchange charges, which in some cases have not been equitable, in other cases quite excessive.
3. Reduction of the expense of collection to as near abso lute cost as possible.
4, The release and more equitable distribution of the large balances at present maintained by the smaller banks in the banks in larger centers for the purpose of receiving par collection of out-of-town miscellaneous items.
The disadvantages, as summarized, are: 1. The loss of exchange on the part of the smaller banks, which exchange they have deducted in remitting checks on themselves.
2. The revision and, in many cases, termination of the reciprocal relations which have under the old system been maintained for many years between the smaller banks and their correspondents in larger cities, as the Federal Reserve banks will to a great extent render the same service.
Balancing advantages against disadvantages, the unpreju diced must recognize what is to be gained under the system as of greater value to business than what would be lost to the banks.
10. Gold settlement fund.—Provision is made also for clearings between the reserve banks. Each of the reserve banks is required to maintain a balance of at least $1,000,000 in the so-called gold settlement fund, which is in care of the Reserve Board at Washington. At the close of business on each Wednesday each re serve bank telegraphs to the Board the amounts in even thousands which it owes to each of the other eleven reserve banks. The telegram is confirmed by mail; it is sent at the close of business on Tuesday if Wednesday is a holiday. On Thursday morning the settling agent of the Board calculates the net debit and credit balances of each reserve bank, and corre sponding entries are made on the books of the gold settlement fund. A reserve bank may draw out at its pleasure any amount of its credit balance above the $1,000,000 minimum which must always be on deposit. If the balance of any bank falls below $1,000,000 it must be built up again immediately by the deposit of gold, gold certificates or gold order cer tificates. The last named are certificates issued by the Treasurer of the United States against gold de posited with him from the fund.
On November 22, 1917, the twelve reserve banks had nearly $376,000,000 on deposit in the fund after clearing. Exchanges for the month preceding that date amounted to over $3,800,000,000 but the net deposits or credits were under $380,000,000, mean ing that the amount which changed ownership was slightly under ten per cent of the total clearings.