CLEARING-HOUSE. An office where bankers settle daily with each other the bal ance 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 ale house of those times, the general resort of pro prietora of new enterprises. The system, however, increased in usefulness ao 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 1853, Boston in 1856, Philadelphia, Baltimore, and Cleveland in 1858, Worcester in 1861, Chicago in 1865, and since that date the system has extended to most of the cities In which there are several banks. They 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 banks— private bankers not being admitted, as in London. Two clerks from each bank attend at the clearing house 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 pre vious day. At the sound of a bell, the outside men begin to move, and at each desk they depoait the proper parcel, with an account of its til, having walked around, they find 'themselvea 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 banka their demands on his bank. A compariaon of , the amounts tells him at once whether he is to pay Into or receive from the clearing-house a balance in money. Baiancea are settled daily. In London the practice of presenting checks at the clearing-houae has been held a good preaentment to the banker at flaw. 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 uaually again presented at the bank.
To accomplish this purpose of settling daily bal ances 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. (Pa.) 358, and Philler v. Yardley, 62 Fed. 645, 10 C. C. A. 562, 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 sev eral 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 dis turbance there is attained concerted action by the banks of a city. In the panic of 1893, the New York clearing-house issued "clear ing-house certificates" representing the de posit of securities; these could be used by the banks to settle clearing-house balances.
Such certificates are held valid, and suit may be brought by the clearing-house com mittee upon notes included in the collateral deposited by a bank for the purpose of tak ing out certificates ; Philler v. Woodfall, 32 W. N. C. (Pa.) 183; Philler v. Field, 29 W. N. C. (Pa.) 139; Philler v. Esler, 29 W. N. C. (Pa.) 258. A clearing-house due bill is an ordinary due bill from a bank "to Banks," and usually, stipulates that it is good when both signed and countersigned by duly au thorized officers, and to be payable only through the clearing-house on the day after its issue. During the financial difficulties above referred to such due bills were used by the banks in payment of checks whenever practicable, being as available as cash for deposit in another bank of the same' city. They are held not to be certificates of de posit but negotiable, and requiring indetnni ty to recover the amount due on them if lost or stolen ; Dutton v. Bank, 16 Phila. (Pa.) 94.