Chapter XX: Banking

IMAGINE that you are a druggist in a small town. Suppose that a woman comes in to buy two ounces of camphor and in exchange gives you three eggs. In a few moments, perhaps, a man enters to buy a safety razor and brings with him wheat enough to pay the bill. Another, again, wishes to trade a turkey for a fountain pen. You can readily see the inconvenience to which you would be put in such exchange of actual commodities; yet this was the method used in primitive times, a method called _barter_.

To overcome the inconvenience of barter, as civilization advanced, it became necessary to establish a common medium of exchange, which could be accepted for anything one had to sell and with which one could buy anything he wished. This is what we call _money_. To meet the requirements, money must not be bulky, must be durable, and must not readily change in value. In civilized countries gold and silver are the bases of exchange.

But gold and silver are heavy and inconvenient to carry about in large, or for that matter in small, quantities, and for convenience the following kinds of paper money have been established:

1. _Gold Certificates_ are issued with the government's guarantee that there is gold deposited in the Treasury equal to the amount of the face of the bill. At any time the one holding such a bill may demand of the Treasury that he receive gold for it.

2. _Silver Certificates_ are similar to gold certificates, except that silver is deposited in the Treasury instead of gold.

3. _United States Treasury Notes_ are promissory notes of the government to pay the sum indicated. They are not payable on demand.

4. _National Bank Notes_ are promissory notes issued by the national banks and are payable on demand of the bearer. Before a national bank may issue such notes, it must own United States government bonds of at least the amount for which it issues notes. These bonds are held by the Treasurer of the United States as security that the bank will pay its notes. According to the Owen Glass Bill, passed in December of 1913, national bank notes may at the option of the banks be gradually withdrawn from circulation.

Credit

_Credit_ is a promise to pay at some future time for a thing which you receive now. Its use is probably as old as the practice of exchange and quite as important. The simplest and most extensive form of credit is "book" credit, such as you get at the grocer's or butcher's or at the department store. To explain a little more complex kind of credit: Suppose you owe Smith one hundred dollars. At the same time Smith owes Jones one hundred dollars. Because you owe Smith, he may give Jones an order to collect the money from you. With this order Jones may pay his lawyer, let us say. Perhaps the lawyer has bought a bill of goods from you. He pays you with the same order. You destroy the "note," and thus four actual transactions have been taken care of without the use of any money. The business institution which deals especially with credits is the bank.

Banks

A bank which fulfills every banking function must have these three departments: (1) the commercial department, (2) the savings department, (3) the trust department. Some institutions specialize in one department more than in either of the others, and thus, taking the name from their principal function, banks are known as follows: (i) commercial banks or banks of deposit, (2) savings banks, (3) trust companies.

Banks of Deposit

Banks of deposit or commercial banks are business men's banks. Their two principal functions are (1) receiving money for safe-keeping on deposit, and (2) loaning money to business men at interest. The deposit function is based on confidence and credit. The business man takes his money to the bank not only because it is convenient for him to do so, but also because he has confidence that the money will be more carefully protected than if he kept it in his own possession. In depositing his money in the bank, the business man uses a _deposit slip_ such as the one illustrated here. The teller puts down the amount in the _bank book_ of the depositor, who is credited with that amount on the bank's books. He is entitled to draw just that much actual cash or that much credit in the form of _checks_. (See page 339.) Most firms do not deposit a sum of money and then promptly draw it out again in the form of checks to pay current liabilities, but maintain a fairly steady balance in the bank. On large average monthly balances most banks allow interest, varying from one per cent on balances of one thousand dollars to three per cent on balances of ten thousand dollars or more.

Discount

Because a large bank has many depositors, the aggregate of all the balances makes a considerable sum of money. Bankers have learned by experience just what proportion of their deposits they can depend on to remain steadily on deposit as a balance, and thus they know what proportion of their deposits it is safe to use for the purpose of _discount_. The simplest case of the discount function is the discount of a promissory note. In the note shown in the illustration after ninety days John H. Blodgett will receive from Lucius Thomas five hundred dollars with interest. But perhaps Blodgett cannot wait ninety days for his money. In this case, he takes the note to his banker, who will pay him the five hundred dollars less a certain percentage or discount, which is the bank's profit on the transaction. The bank then collects the note when it becomes due.

Collateral

Instead of cashing a note held by one of its customers, the bank may itself loan money at interest for a short period of thirty, sixty, or ninety days, taking the note of the business man to whom the money is loaned. In most cases, however, unless the bank knows the business man well, a certain amount of _collateral_ is demanded as an assurance that the borrower will pay the loan when it becomes due. The amount of collateral deposited with the bank is usually 10% to 25% in excess of the amount loaned, and it may take the form of stocks or bonds; mortgages on real estate; liens on stock, fixtures, or personal property; or warehouse receipts. When the amount borrowed is paid, the collateral is returned; if it is not paid within a reasonable time, the collateral is sold, and the amount loaned, with interest to date, is taken from the proceeds.

There are, of course, other functions of banks of deposit practised quite generally by all banks, and these will be explained later. The functions just described, however, distinguish banks of deposit in a general way from the other two classes.

Savings Banks

A savings bank accepts from its depositors small amounts of money which are not subject to withdrawal by check, but on which it pays a low rate of interest. As a general rule, an account may be opened with one dollar; and when the initial deposit is made, the depositor is furnished with a pass book, similar to the bank book, in which further deposits, interest credits, and withdrawals are recorded. Interest is compounded every four or six months, and money must, as a general rule, remain on deposit until an interest payment date before the depositor receives any interest on it. The usual rate of interest is three per cent, although four is often paid. Frequently, before banks allow deposits to be withdrawn, they demand a certain number of days' notice, usually thirty. It is well to investigate the conditions under which the depositor places his money in the safe-keeping of the bank, because the withdrawal requirements are often stringent. Because of the stability of this class of deposit, banks are always anxious to increase their savings accounts, as a large proportion of the funds may be used for loans.

A form of the savings bank established in the United States in 1911 is the postal savings bank, in which the post-office is made the depository for savings. The post-office in the town deposits its funds in the local national or state bank, which, as security for safe-keeping, must deposit with the Treasurer of the United States bonds at least equal in value to the amount of savings deposited in the bank. Postal savings banks are practically absolutely safe, because, if the bank which takes care of the funds should fail, the bonds may be sold, so that the savers will receive their money. From deposits made in the postal savings bank, the return to the depositor is only two per cent, whereas the return from deposits made in the bank's own savings department is three, three and a half, and sometimes four per cent.

Trust Companies

_The Richards' Baby Stocking Fund_

A miner named Richards was killed in an accident in an
Alaska mine. Among his possessions were found a number
of letters and a baby stocking containing a little
gold dust. The letters told that Richards had a little
six-year-old daughter, who was now left destitute. The
rough miners made up a fund of $2,500 in gold dust,
depositing it with the United States Commissioner of
the Territory of Alaska, to be held by him until the
proper disposition of it could be made. A committee
was appointed, who agreed that one hundred dollars a
year for ten years should be used to give the child a
common school education, and then five hundred dollars
each year to give her a college education. A legal
guardian was appointed, and the Kansas City Trust
Company asked to act as co-guardian to invest the
money and make the required remittances. The funds
were first deposited by the commissioner in a bank in
Portland, which sent them to the Kansas City Trust
Company. Correspondence was of course carried on at
the same time, the Kansas City Trust Company agreeing
to accept the trust without remuneration. They have
invested the money in five per cent bonds, thus
increasing the fund yearly.

This is called a _trust_ because the money is entrusted for safe-keeping and investment to the bank, which is called the _trustee_. A bank may also become the trustee for property left at the death of a person, both when there is a will and when there is none. When there is no will and the bank takes charge of the affairs of the deceased, the bank is called the _administrator_; when there is a will, the _executor_. Another important function of the trust company is acting as _receiver_ for a company which has failed; that is, adjusting the company's affairs in the way fairest both to the stockholders and to the company's creditors. The trust company often acts, also, as _agent_ for its clients' property, performing the same duties as a real estate agent.

Form of Remittance

Banks as a class are distinguished one from the other according as they specialize in one or more of the functions described above. However, there are certain services that all banks perform and certain facilities that they all offer in connection with the payment of money from one person to another. These concern the forms of remittance.

If you have studied business arithmetic or bookkeeping, you very likely know the definite forms that are used. At all events, you know that currency should never go through the mails. The following is a brief review of the more important forms that may be used. Study the illustrations carefully, noticing particularly the similarity of form in all. Uniformity in such matters is desirable because it saves time as well as misunderstandings. The forms we shall consider are:

1. The check
_a._ Personal
_b._ Certified
2. The money order
_a._ Express
_b._ Postal
3. The bank draft
4. The time draft
5. The sight draft

_Check._--A check is a written order on a bank, signed by a depositor, directing the bank to pay a certain person a certain sum of money. When the bank pays the order, it deducts the amount from the depositor's account. The one who signs the check is called the _drawer_ or maker; the person to whom or to whose order a check is made payable is called the _payee_; the bank on which a check is drawn is called the _drawee_.

Of course, before you could write a check for one hundred dollars, you must have deposited at least one hundred dollars in the bank on which the check is drawn. The bank supplies you with a check book, consisting of blank checks, each attached to a stub. When you write a check, you put the same information on the stub to be kept for reference. Then you tear off the check through the perforated line, using it to pay for whatever you may have purchased.

_Certified Check._--Suppose, however, that you are writing this check to pay a debt to a stranger who lives in another city. He may hesitate to accept it as money. That he may have no cause to doubt your ability to pay the check, you take it to your bank to have the cashier investigate your account. If he finds that you have sufficient funds, he writes or stamps _Accepted_ or _Certified_ on the check and signs his name. At the same time the amount of the check is deducted from your account. Such a check is accepted without question when the holder is properly identified.

_Endorsement._--If A gives you his check for twenty-five dollars, you could not receive the money until you had endorsed the check; that is, put your name on the back, which is, in effect, giving a receipt for the money. You may do this in various ways. You may endorse:

1. In blank; that is, merely write your name across
the back.

2. In full, by saying, "Pay to the order of ----" and
signing your name.

3. By restricting the payment to a particular person;
as, "Pay to ----" This check cannot now be cashed by
anyone except the one named in the endorsement.

_Express Money Order._--An express money order is much like a check, except that it is drawn on an express company instead of on a bank and reads, for example: Continental Express Company agrees to transmit and pay to the order of ---- (the one to whom you are sending the money) ---- (the amount). The order is signed by the treasurer of the company and countersigned by the agent who sells it. You can buy such an order at any express office. It may be endorsed like a check.

_Postal Money Order._--The other form of money order, the postal, is an agreement signed by the postmaster of one city that the postmaster of another city will pay the amount of money named in the order to the person named in the order.

_Bank Draft._--A bank draft is very much like a check, except that instead of two individuals dealing with each other two banks conduct the transaction, their places of business being in different cities or villages. A bank draft is sometimes called a bank check, because in the case of both a draft and a check one party draws upon another with whom the first has funds deposited. As a general rule, banks and business houses require that remittances be sent to them by drafts drawn on New York or Chicago banks, as there is a charge called _exchange_ made in the collection of checks drawn on local banks.

In the draft that follows, the State Bank of Utah, of which Henry T. McEwan is Assistant Cashier, makes out the draft. The bank which is ordered to pay the money is the National Park Bank of New York. The money is to be paid to Henry L. Fowler. The State Bank of Utah is called the drawer; the National Park Bank of New York, on whom the draft is drawn, is the drawee; Henry L. Fowler is the payee.

The payment indicated above was probably made without actually sending the money from Salt Lake City to New York. It was done in this way:

Henry L. Fowler of Salt Lake City owes one hundred dollars to a man living in an Eastern city, let us say Charles Emery of Rochester, N. Y. Mr. Fowler goes to the State Bank of Utah in Salt Lake City and "buys a draft on New York," made payable to himself. The bank makes out the above, charging Mr. Fowler one hundred dollars plus a fraction of one per cent for its trouble. Mr. Fowler endorses it in full to Mr. Emery of Rochester and sends the draft to the latter. He has the draft made payable to himself so that the endorsement will constitute a full record of the transaction. Mr. Emery takes the draft to his own bank in Rochester, endorses it in blank, and receives the one hundred dollars. Thus Mr. Fowler has paid out the money and Mr. Emery has received it.

The way the banks conduct the transaction is as follows: There are certain big money centers in the country; e.g., New York, Chicago, St. Louis, San Francisco. Important banks in other places have money on deposit in at least one bank in each of these centers. The banks which thus deal with one another are called _correspondents_. The National Park Bank is the correspondent of the State Bank of Utah. When Mr. Emery cashes the draft at his Rochester bank, the latter sends it to its New York correspondent, and at the same time charges the correspondent one hundred dollars. The correspondent presents the draft to the National Park Bank, which pays the money and charges the same amount to the State Bank of Utah. Explain how this settles the transaction.

_Time Draft._--A time draft is much like a bank draft, in that two banks conduct the principal part of the transaction for two individuals, but no money is actually paid at the time the draft is drawn. The details of a transaction of this kind are explained on the following page.

Horace Prang of 1008 Elm Street, Columbus, Ohio, owes Loetzer & Co. five hundred dollars, due August 27, 1915. Loetzer & Co. make out the draft above and deposit it in the Bank of Buffalo. The latter sends the draft to its correspondent in Columbus, which presents the draft to Horace Prang. If he is willing to pay the note when it falls due, he writes across the face of it, "_Accepted_" adds the date, and signs his name. It is now returned to the Bank of Buffalo. The Bank of Buffalo will then discount the draft for Loetzer & Co.

_Sight Draft._--A sight draft is much like a time draft, except that the amount is paid by the person on whom it is drawn as soon as it is presented, instead of after a stipulated length of time.

Suppose the Empire Elevator Co. of Buffalo has sold $420 worth of grain to the Smith Milling Co. of Springfield, Mass. When the grain is loaded on the cars, the railroad company gives the Empire Elevator Co. a bill of lading. Now, the Smith Milling Co. must possess this bill of lading before it can take the grain from the cars at Springfield. The Empire Elevator Co. deposits the bill of lading with the above draft in the Marine National Bank of Buffalo. This bank sends both to its correspondent in Springfield. The Springfield bank presents the draft to the Smith Milling Co., who may take the grain from the cars on payment of the draft. In case of non-payment, both draft and bill of lading are returned to the Marine National Bank of Buffalo, and the Empire Elevator Co. must make arrangements for the return or the disposal of the grain.

=Exercise 301=

1. F. R. Thompson, sales manager of the New York Trust
and Savings Bank, sends a circular letter to a number
of banks, saying that he is enclosing a booklet that
describes a number of bonds suitable for the security
of postal savings deposits, the legality of which has
been carefully investigated. In his letter he mentions
especially Omaha, Nebraska, School 4½% bonds, price to
net 4.40%; Seattle, Washington, Harbor 5% bonds, price
to net 4½%; and Hoquiam, Washington, Bridge 5½% bonds,
price to net 5%. Reproduce the letter, addressing it
to W. W. Fallows, Cashier of the Mercantile National
Bank of Pueblo, Colorado.

2. Mr. Fallows answers, saying that his knowledge of
the postal savings law is vague and that he would be
glad if Mr. Thompson would give him definite
information on the subject.

3. Mr. Thompson replies that he is enclosing a copy of
the postal savings law. He assures Mr. Fallows that he
can serve the latter both in buying the proper
securities and in depositing them with the Treasurer
of the United States. Application for such deposits
must be made by the bank itself. Mr. Thompson will
gladly inform him if Mr. Fallows does not know the
steps to be taken or the report to be submitted.

4. Punctuate, using a letterhead:

Mercantile Trust Company New York City Dec 2 19--
manager the bank of Scotland 3c bishop E C London
England dear sir we are sending you herewith advice of
the issuance of our circular letter of credit No. 262
in favor of Miss Helen Jackson for 300 pounds sterling
Miss Jackson is at present in Paris France and the
letter of credit has been forwarded to Messrs Thomas
Cooke and Son 1 Place de l'Opera Paris we have
requested Messrs Thomas Cooke and Son to forward to
you two specimens of Miss Jacksons signature which we
have signed and forwarded to Messrs Thomas Cooke and
Son for that purpose so that you may have these
signatures before any drafts against the letter of
credit are presented to you yours very truly James R
Hudson treasurer.

What is a letter of credit? How did Miss Jackson get
it?

The Bank of Scotland is the correspondent of the
Mercantile Trust Company. Explain.

Why should the New York bank forward Miss Jackson's
signature?

5. Write the letter that the Mercantile Trust Company
sends to Messrs. Thomas Cooke and Son.

6. Write the letter that Messrs. Thomas Cooke and Son
send to the Bank of Scotland.

7. W. T. Randall, cashier of the Milwaukee Trust and
Savings Bank, Milwaukee, Wis., writes a letter, the
purpose of which is to secure savings accounts. A club
of 500 members is to be formed. Each member is to buy
a share by paying one dollar and to pay one dollar per
week per share, the amount to draw interest at 3%.
After forty-eight weeks he gets credit for fifty
dollars per share, thus securing over 5% interest on
his money. Make the offer attractive.

8. Some time ago a bank in your city discounted a note
held by George Carpenter, signed by Martin Kugerman.
The note falls due in ten days. As cashier write to
Mr. Kugerman, telling him that you hold the note and
that you hope he will be able to remit on the day of
maturity.

9. Your bank loaned Clarence Wentworth $500 for ninety
days, taking as security $700 worth of collateral. The
note falls due in a week. Write to Mr. Wentworth,
reminding him that the note falls due and asking him
whether he wishes to pay it off or whether he wishes
it extended.

10. John Elsworth, who has an account with you,
writes, saying that by registered mail he is sending
you certificates of 20 shares Union Pacific common
stock, 50 shares National Biscuit Co. preferred stock,
5 (bonds) American Telephone and Telegraph convertible
4½'s, 3 (bonds) New York and East River Gas Co. first
mortgage 5's. He asks you to take care of them and
collect dividends and interest when they are due,
crediting them to his account.

11. Your correspondent, the First National Bank of
Janesville, Wis., writes, asking you to forward by
registered mail $5,000 in currency.

=Exercise 302=

1. Mr. Henry Carroll of Wausau, Wis., writes to Mr.
Randall (Exercise 301, 7), asking him to buy 10 shares
of C. & N. W. R. R. preferred stock at 134 or better.
When they are bought, he adds, they can be sent through
any bank in Wausau.

2. Mr. Randall replies by sending the 10 shares of
stock to the bank's correspondent in Wausau, the First
National Bank, telling the latter to deliver them to
Mr. Henry Carroll on payment of the enclosed draft for
$1340 with exchange. Write the letter.

3. A dressmaker in South Bend, Ind., has applied to
Marshall Field & Co., Retail, State and Washington
Streets, Chicago, for a charge account. The department
store makes inquiries concerning her at her bank, the
Commercial and Savings Bank of South Bend. Write the
letter.

4. The bank replies that she has maintained a small
but steady balance, that she has never overdrawn her
account, and that in their opinion her credit would be
good up to $100 monthly. Write the letter.

5. Theodore Buchanan of St. Louis sends Philip Newborg
of your city a check for $100 with which he pays a
debt to Charles Springer of Minneapolis. Springer
endorses it and deposits it in the Security National
Bank. The check is returned marked N.S.F., and the
Security National Bank notifies Springer of the
situation and of the fact that his account has been
charged with $104, the amount of the draft plus
expenses.

6. One of the depositors of the Milwaukee Trust and
Savings Bank brings to the Cashier a note which is
about due, and asks the bank to collect it. The maker
of the note is William T. Adams of Seattle. The
Cashier writes to the bank's correspondent in Seattle,
the Scandinavian American Bank, asking the latter to
collect. Write the letter. (See Exercise 301, 7.)

7. The Scandinavian American bank writes to William T.
Adams, telling him that it holds a note signed by him,
due ----, and asking him to make prompt payment. Write
the letter.

8. Mr. Adams pays the note. The Seattle Bank notifies
the Milwaukee Bank, enclosing a draft for the amount.
Write the letter.

9. See Exercise 301, 10. As John Elsworth's banker
send the coupons for the American Telephone and
Telegraph bonds to your correspondent in New York, the
National City Bank, because the interest is payable in
New York. Ask the bank to make the collection. Write
the letter.

10. The National City Bank makes the collection and
informs you by means of a printed form that it has
credited you with the amount, $112.50. The form is
just like a letter except that it is already printed
with blanks left for the name and the address and for
itemizing the coupons collected. Write such a form.

11. One of your depositors has overdrawn his account.
Notify him of the fact. Do this courteously so that
the depositor may have no reason to withdraw his
account.

12. In your city there is a real estate dealer who
often has large sums of money idle for a short time
because, when he sells one piece of property, he does
not always have another immediately in view. He is not
a depositor in your bank. Write to him, inducing him
to take out a Certificate of Deposit at such times and
telling him that the advantages of such a certificate
are that he will get 3% interest on the money
deposited and that he may draw out the money at any
time.

13. One of your depositors has written to you, asking
for a loan of $5,000 for nine months. Write to him,
saying that it is not your practice to make time loans
for definite periods longer than six months, as it is
not a good plan thus to tie up your deposits. Explain
that as most of a bank's deposits are payable on
demand, you would suggest his taking out a demand loan
for $5,000, payable on the demand of the bank. Under
ordinary business conditions such a loan might easily
run for nine months.

14. R. F. Marsden, President of the Truesdale Cotton
Mill, Birmingham, Ala., has written to you, asking
whether he can secure a loan next fall on the cotton
in the mill as collateral. Reply that you feel certain
that satisfactory arrangements could be made if the
cotton were stored in an accredited warehouse, so that
you could accept the warehouse receipt as collateral.

=Exercise 303=

Punctuate and paragraph the following letter, which explains one function of a trust company:

Dear sir as you are one of our clients you are
familiar with the reputation of this bank for sound
banking and conservative investments you may not
however be aware that we have a fully equipped trust
department prepared to act in any of the numerous
capacities in which the services of trust companies
have proved of special value at this time we wish to
call your particular attention to the service which
this department is prepared to render as trustee under
agreement it is natural that one who has accumulated
property should desire to superintend or direct its
disposition formerly this was done by will now however
as the complex laws of the various states frequently
necessitate the payment of double or triple
inheritance taxes it is becoming a more and more
common practice for a man during his lifetime to
administer his own estate so to speak this may be
accomplished through the establishment of a trust with
respect to either a part or all of one's property it
can be accomplished not only with absolute safety to
the donor but with entire secrecy as well the terms of
the trust being regarded as absolutely confidential
furthermore the donor has the satisfaction of
disposing of his property during his lifetime in
accordance with his desires the life of a trust
company unlike that of any individual is of perpetual
duration death does not interfere with its management
of the trust estate its financial responsibility and
the safeguards thrown around trust estates by the
state laws insure the safety of a trust fund if you
are interested in this subject let us discuss it with
you either in person or by correspondence when this
bank is named in a trust capacity no charge is made
for service or advice in connection with the drafting
of the trust instruments yours truly

Before writing the following, re-read The Richards' Baby Stocking Fund, page 337.

1. Suppose that you were a newspaper correspondent in
Alaska at the time Richards was killed. For your home
paper write an account of the finding of the baby
stocking. In what ways would this account differ from
a magazine article on the same subject?

2. As if you were the United States Commissioner of
the Territory of Alaska, write to a Portland bank
saying that you are sending the $2,500 to them, and
asking them to put the funds in the care of a reliable
trust company.

3. The Portland bank writes to the Kansas City Trust
Company, asking if the latter will accept the trust.
Write the letter.

4. The Kansas City Trust Company replies that it will
accept the trust without remuneration. Write the
letter.

5. The Portland bank informs the United States
Commissioner of the Territory of Alaska of the
disposition of the funds. Write the letter.

=Exercise 304=

=Topics for Investigation and Discussion=

1. The panic of 1907 and some of its lessons.
2. Future banking reform.
3. Government supervision of banks.
4. Unscrupulous banking companies.
5. Clearing house certificates.
6. Postal savings banks.
7. The work of the clearing house.
8. The need of banks in a community.
9. The development of real estate firms into banks.
10. The Owen Glass Currency Bill.

=Exercise 305=

Books that will Suggest Topics for Talks

CROCKER, U. H., The Cause of Hard Times.
FONDA, ARTHUR J., Honest Money.
GIBBS, H. C., A Bimetallic Primer.
MCADAMS, GRAHAM, An Alphabet in Finance.
NEWCOMB, SIMON, The A B C of Finance.
NORTON, S. F., Ten Men of Money Island, or The Primer of Finance.
REEVES, JOHN, The Rothschilds: The Financial Rulers of Nations.
WHITE, HORACE, Money and Banking.

=Exercise 306=

Write the following from dictation:

1

THE DAILY ROUTINE OF THE CLEARING HOUSE

Each bank sends two clerks to the Clearing House: a
delivering clerk and a settling clerk. There are three
rows of seats running through the clearing room
lengthwise, one in the center and one on each side
parallel with it. The settling clerks occupy these
seats and each one has a sufficient amount of desk
room in front of him to do his work on, his space
being separated from his neighbors' by a wire screen.
The delivery clerks, with their packages of checks in
separate envelopes, stand in the open space in front
of the settling clerks. At two minutes before 10
o'clock the manager, whose station is an elevated open
space at the extreme end of the room, strikes a bell.

The movement has all the precision of a military
drill. When the second bell sounds, at exactly 10
o'clock, each delivery clerk takes one step forward,
hands the proper package to the settling clerk of the
bank next to him, drops the accompanying ticket
showing the amount into an aperture like a letter box,
and places before the settling clerk his schedule, on
which the latter places his initials. Thus the
procession moves uninterruptedly until each delivery
clerk has presented to each settling clerk the proper
package and ticket. Usually this part of the operation
is completed in ten minutes. Meanwhile the proof
clerk, who occupies a desk near the manager, has
entered the claims of each bank under the head "Bank
Cr." on a broad sheet of paper.

Inasmuch as the amount of each bank's claim against
the Clearing House (entered under the head "Banks
Cr.") is the sum of all the tickets which its delivery
clerk has pushed into the letter boxes of the other
banks, it follows that all the tickets of all the
banks should equal all the entries under that head.
The next step in the operation is for each settling
clerk to arrange the amounts of all the tickets in his
letter box in a column, add it up, and send the amount
to the proof clerk, who transcribes and arranges it
according to the bank's number under the head "Banks
Dr.," so that the debit of Bank A shall be on the same
line with its credit.

Then the difference between the two will show how much
the bank owes the Clearing House or how much the
Clearing House owes the bank. The time occupied by the
settling clerks in arranging their tickets and adding
up the columns is about half an hour. As fast as these
footings are completed, they are sent to the proof
clerk, who puts them in the debit column opposite the
credits of the banks, respectively. When all are
completed, if no error has been made, the footings of
the credit and debit columns must be exactly equal and
the footings of the two other columns, which show the
differences, must be exactly equal. Then these
differences are read off slowly and in a distinct tone
by the manager, so that each settling clerk can write
down the sum that his bank has to pay or to receive.
As time is money at the Clearing House, a fine is
exacted for every error and every delay in making
footings, for every disobedience of the orders of the
manager, or for every instance of disorderly
conduct.--Horace White: _Money and Banking_.

2

The Treasury, in connection with its money washing,
has asked national banks to exercise more care in
sending in money for redemption. Banks frequently put
into the same bundle, good notes, bad notes, and notes
of different denominations. When they are mixed in
this way, it requires a good deal of work to separate
the money. The Treasury thinks that the banks could do
this work, so that, when the money reaches Washington,
it could easily be separated by packages instead of
each package having to be separated first. The
Assistant Secretary says he believes that, when he
gets the subject worked out in detail, new washed
money will be returned to the bank in any denomination
desired on the same day that it is received; that
money unfit for laundering will be destroyed and new
money issued. This expeditious handling of money sent
in for redemption cannot, however, be attained, he
admits, without the co-operation of the banks. In a
short time, he believes, all banks will see that it is
to their benefit to do this.