A Clearing House is an institution organized by associated banks to simplify and facilitate daily exchanges of items and settlements of balances resulting from such exchanges.

Many clearing-house associations also look after the mutual welfare of their members by prescribing rules to govern in various important matters; as, uniform rates of collection and exchange, interest, etc.

Origin. - Before clearing houses were organized each bank in a given city had to keep an account with practically every other commercial bank in that city. Statements of these accounts were made up daily and given to "runners," who took them, together with the items of charge, to the debtor banks for settlement. All amounts were usually paid in gold. In the larger cities this work was very laborious and unsatisfactory. To facilitate matters these runners conceived the idea of meeting at a given point and adjusting balances. From these first crude gatherings has sprung the stupendous clearing-house system.

The Officers of a clearing-house association are usually president, vice president, secretary, treasurer, manager, and clearing-house committee. Frequently there are one or more special committees; as, conference committee, nominating committee, arbitration committee, etc.

Preparing Exchanges for Delivery. - When exchangeable paper is received at a bank it is classified according to the bank at which it is payable. The work of assorting the items for delivery to the clearing house is facilitated by the use of a case of compartments. This case is provided with a compartment for each member of the clearing house. The compartments are designated by the clearing-house numbers of the banks. Before the items are placed in these compartments they are stamped with the receipted indorsement usually required by clearing-house associations. The form of this indorsement is not always the same, but it should always indicate the channel through which the paper has passed.

Received Payment through the

Boston Clearing House,

Feb. 16, 19 - .

Winthrop National Bank.

The above is a common form of indorsement used for items paid through the clearing house.

At the close of the day, or at intervals during the day, the exchanges are taken from the compartments, and the amounts listed on a blank entitled Exchange Slip, as shown in the accompanying illustration.

The first total on the exchange slip represents the amount of exchanges received by No. 24 before the close of banking hours on Feb. 15, to be sent to the clearing house the following day. The additional items represent the morning exchanges which are received by mail or among the deposits before ten o'clock. The second total is, then, the amount of claims carried to the clearing house by No. 24, Faneuil Hall National Bank, against No. 22, the National Bank of Commerce.

A separate exchange slip, appropriately labeled, is prepared for each member of the clearing house.

Duplicate lists of all items taken to the clearing house are made by the bank and preserved for future reference.

The totals of the exchange slips are next copied on a blank entitled Settling Clerk's Statement

The Settling Clerk's Statement contains a printed list of the names and numbers of all the banks connected with the clearing-house association. The first debit column of this sheet is usually made up from the exchange slips at the close of each business day, thus completing the heaviest part of the work the day before clearing. On the morning of clearing the second debit column is filled out from the final totals of the exchange slips. The credit column is