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   New York Clearing House Association Records, 1868-1950

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Preferred Citation

Identification of specific item; Date (if known); New York Clearing House Association Records; Box and Folder; Rare Book and Manuscript Library, Columbia University Library.

COinS Metadata available (e.g., for Zotero).

Summary Information

Abstract

The New York Clearing House Association Records consist of 42 large volumes of the association's financial ledgers, which contain daily and occasionally monthly accounts of the assets of numerous financial institutions in New York City in the late nineteenth and early twentieth centuries. This is not a complete set of all New York Clearing House records between 1868 and 1950: missing are volumes for the years 1871-1872, 1875-1877, 1918-1922, 1937, and 1940.

At a Glance

Call No.:MS#1464
Bib ID:7094252 View CLIO record
Creator(s):New York Clearing House Association
Title:New York Clearing House Association Records, 1868-1950
Physical description:52 linear ft. (42 ledgers)
Language(s): In English.
Access: This collection is located off-site. You will need to request this material at least twenty-four (24) hours in advance to use the collection in the Rare Book and Manuscript Library reading room. This collection has no restrictions.  More information »

Arrangement

Arrangement

This collection is arranged chronologically.

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Description

Scope and Content

The New York Clearing House Association Records consist of 42 large bound volumes.

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Using the Collection

Offsite

Access Restrictions

 This collection is located off-site. You will need to request this material at least twenty-four (24) hours in advance to use the collection in the Rare Book and Manuscript Library reading room.

      offsite requestMore information and link to off-site request form

This collection has no restrictions.

Restrictions on Use

Single photocopies may be made for research purposes. Permission to publish material from the collection must be requested from the Curator of Manuscripts/University Archivist, Rare Book and Manuscript Library (RBML). The RBML approves permission to publish that which it physically owns; the responsibility to secure copyright permission rests with the patron.

Preferred Citation

Identification of specific item; Date (if known); New York Clearing House Association Records; Box and Folder; Rare Book and Manuscript Library, Columbia University Library.

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About the Finding Aid / Processing Information

Columbia University Libraries. Rare Book and Manuscript Library; machine readable finding aid created by Columbia University Libraries Digital Library Program Division

Processing Information

Papers processed in March 2009 by Justin Jackson, GSAS 2012

Finding aid written in March 2009 by Justin Jackson, GSAS 2012

Machine readable finding aid generated from MARC-AMC source via XSLT conversion May 2, 2009 Finding aid written in English.
    2009-05-02 File created.
    2009-06-02 xml document instance created by Lea Osborne.

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Subject Headings

The subject headings listed below are found in this collection. Links below allow searches at Columbia University through the Archival Collections Portal and through CLIO, the catalog for Columbia University Libraries, as well as ArchiveGRID, a catalog that allows users to search the holdings of multiple research libraries and archives.

All links open new windows.

Genre/Form

HeadingCUL Archives:
Portal
CUL Collections:
CLIO
Nat'l / Int'l Archives:
ArchiveGRID
Ledgers (account books)PortalCLIOArchiveGRID

Subjects

HeadingCUL Archives:
Portal
CUL Collections:
CLIO
Nat'l / Int'l Archives:
ArchiveGRID
Banks and Banking--Accounting.PortalCLIOArchiveGRID
Banks and Banking--New York (State)PortalCLIOArchiveGRID
Banks and Banking--New York (State)--New York.PortalCLIOArchiveGRID
Finance--New York (State)PortalCLIOArchiveGRID
Finance--United States--Accounting.PortalCLIOArchiveGRID
Finance--United States.PortalCLIOArchiveGRID
New York Clearing House Association.PortalCLIOArchiveGRID

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History / Biographical Note

History

The New York Clearing House Association was the first and largest bank clearing house in the United States. Established before the Civil War, this entity was intended by its founders to systematize and rationalize previously disorganized exchanges and settlements between New York City's banks. These institutions which established the Clearing House became the very heart of American finance in the late nineteenth century as the nation developed a financial system increasingly autonomous from the English and European banks on which Americans had previously depended for credit and capital investment. During the American Civil War, the federal government intervened in a growing financial sector and developed fiscal and monetary policies adequate to the Union's military and industrial needs. In the war's aftermath, New York's banks, and the credit the banks made available, financed a rapid expansion of American industry and transportation infrastructure which made the United States a global economic power and conquered the American West by the end of the nineteenth century. In the twentieth century, some of the New York Clearing House's member banks, symbolized in American society, politics, and culture by "Wall Street," came to represent both the awesome power of a robust American financial sector and the greed and irresponsibility which many believed precipitated the disastrous stock market crash of 1929 and the Great Depression of the 1930s.

The California Gold Rush and an explosion in railroad construction marked the four years before 1853, when the Clearing House was founded. In this same period the number of New York City's banks more than doubled, from 24 to 57. Before the Clearing House, banks had settled their accounts in a laborious manner, employing porters to travel from bank to bank to exchange checks for gold specie. This process became a daily event as the number of banks multiplied. However, the actual reckoning of accounts between banks typically occurred on Fridays in front of a Wall Street bank, in what came to be called the "Porter's Exchange." This practice necessarily led to errors in records and abuse. Several bankers looked to London's Clearing House system as a model for resolving the cumbersome weekly settlement process as others expressed frustration with the current system. In 1831, Albert Gallatin, previously the Secretary of the Treasury for the United States and President of the National Bank of New York, wrote that the lack of a daily exchange of drafts among banks "produces relaxations, favors improper expansions and is attended with serious inconveniences."

In 1851, George D. Lyman, a New York bank's bookkeeper, suggested in an anonymous article that banks should consider sending and receiving checks through a central office. On August 18, 1853, he repeated his proposal in another article to which he affixed his name, and asked interested cashiers to contact him if they endorsed his plan. The city's banks responded enthusiastically. On October 4, 1853, the New York Clearing House was officially established by a group of cashiers led by Francis E. Edmonds of the Mechanics Bank. On October 11, in the basement of 14 Wall Street, 52 banks participated in the first transaction, exchanging checks worth $22.6 million. Two decades later, the average daily clearing approached $100 million. At the new Clearing House, specie certificates replaced gold as the means of settling balances. Porters exchanging certificates for gold deposited at the Clearing House's member banks now no longer exchanged specie, thus experiencing fewer errors and risks. The use of specie certificates also relieved the strain of the banks' cash flows and reduced the potential for runs on deposits. Requirements for all member banks, such as weekly audits, minimum reserve levels, and a daily settlement of all balances, ensured increasingly efficient and regularized exchanges.

Lyman retired from his position as manager of the Clearing House in 1864, and was succeeded by William A. Camp. Camp had previously been appointed in 1855 as a discount clerk in the Importers and Traders' Bank of New York. Appointed first teller of the Artisans' Bank the next year, Camp in 1857 was hired as the assistant manager at the Clearing House. He was manager for the Clearing House for the years in which the first volumes of these records began to be kept. "To executive ability of a high order," Albert S. Bolles wrote of Camp and his Clearing House in Practical Banking (1884), Camp "unites unusual accuracy and promptness in the dispatch[sic] of business, as well as a wide acquaintance, both theoretical and practical, with financial subjects...":

"It speaks volumes for the care and scrupulous accuracy with which the business has been conducted, that in the entire history of the Clearing-house, extending over nearly thirty-one years, its transactions have always balanced to a cent. The only instance on record of an error in any statement emanating from it occurred a few years ago in the weekly bank statement, and this was due to an error of one of the clerks in transcribing the figures. In making the entries, the officials at the Clearing-house and their subordinates use ink only. The clerks sent by the banks may at their option make their entries in pencil."

The New York Clearing House naturally became an instrument of financial self-regulation in the numerous economic downturns and financial panics that occurred on average every five-and-a-half years between 1853 and 1913, in a rapidly expanding American economy. Leading Clearing House member banks first attempted to stabilize a tottering financial system in the 1857 panic. When specie payments were suspended, Clearing House banks, in an effort to shorten the panic's duration and increase public confidence, started to issue "Clearing House Loan Certificates." Effectively a kind of currency, these certificates were backed not by gold but by discounted county and state bank notes held by member banks. Printed with the words "Payable Through the Clearing House," these loan certificates were the joint liability of all Clearing House member banks, making them a far more secure form of payment. They were issued in smaller denominations in the 1873 panic, and were maintained by member banks as a substitute currency in later financial crises, including the depression which began in 1893-1894. Though it has been argued that these certificates violated federal laws against privately-issued currencies, a contemporary once wrote that the Clearing House's loan certificates "performed so valuable a service...in moving the crops and keeping business machinery in motion, that the government...wisely forbore to prosecute."

Because of their stability during financial panics, the Clearing House Loan Certificate's value became a reliable measure of the financial health of the American economy as a whole. Bolstered by discounted collateral, each Loan Certificate was worth more than its dollar equivalent. The currency premium, or exchange rate, between Clearing House money and greenbacks (or gold specie) thus operated as an indicator of the gradual restoration in bank money. When the premium dropped to zero, a one-to-one relationship obtained between certificates and currency, making substitution unnecessary. In 1913, the passage of the Federal Reserve Act by the U.S. Congress established a clearing house system at the federal government level, modeled after the private New York Clearing House and other similar financial exchange institutions across the nation. The Federal Reserve system subsequently and effectively assumed the role which private clearing houses had played in stabilizing and regularizing exchanges and mitigating financial panics.

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