Cyclopædia of Political Science, Political Economy, and the Political History of the United States
By John J. Lalor
NEITHER American nor English literature has hitherto possessed a Cyclopædia of Political Science and Political Economy. The want of a work of reference on these important branches of knowledge has long been felt, especially by lawyers, journalists, members of our state and national legislatures, and the large and intelligent class of capitalists and business men who give serious thought to the political and social questions of the day. The present work, which will be completed in three volumes, is the first to supply that want. It is also the first Political History of the United States in encyclopædic form—the first to which the reader can refer for an account of the important events or facts in our political history, as he would to a dictionary for the precise meaning of a word. The French, the Germans and even the Italians are richer in works of reference on political science and political economy than the Americans or the English. The Germans have Rotteck and Welcker’s
Staatslexikon, and Bluntschli and Brater’s
Staatswörterbuch; the French, Block’s
Dictionnaire Général de la Politique, and the celebrated
Dictionnaire de l’Economie Politique, edited by Guillaumin and Coquelin.The “Cyclopædia of Political Science, Political Economy, and of the Political History of the United States” is intended to be to the American and English reader what the above-named works are to French and German students of political science and political economy. The articles by foreigners in our work are largely translations from the
Dictionnaire de l’Economie Politique, the
Dictionnaire Général de la Politique, the
Staatswörterbuch, and original articles by Mr. T. E. Cliffe Leslie, the eminent English economist; while the American articles are by the best American and Canadian writers on political economy and political science. The task of writing the articles on the political history of the United States was confided to one person, Mr. Alexander Johnston, of Norwalk, Connecticut, thoroughness, conciseness and the absence of repetition and of redundancy being thus secured…. [From the Preface]
First Pub. Date
New York: Maynard, Merrill, and Co.
Originally printed in 3 volumes. Includes articles by Frédéric Bastiat, Gustave de Molinari, Henry George, J. B. Say, Francis A. Walker, and more.
The text of this edition is in the public domain.
- V.1, Entry 1, ABDICATION
- V.1, Entry 2, ABOLITION AND ABOLITIONISTS
- V.1, Entry 3, ABSENTEEISM
- V.1, Entry 4, ABSOLUTE POWER
- V.1, Entry 5, ABSOLUTISM
- V.1, Entry 6, ABSTENTION
- V.1, Entry 7, ABUSES IN POLITICS
- V.1, Entry 8, ABYSSINIA
- V.1, Entry 9, ACADEMIES
- V.1, Entry 10, ACADEMIES
- V.1, Entry 11, ACCLAMATION
- V.1, Entry 12, ACCUMULATION OF WEALTH
- V.1, Entry 13, ACT
- V.1, Entry 14, ADAMS
- V.1, Entry 15, ADAMS
- V.1, Entry 16, ADAMS
- V.1, Entry 17, ADAMS
- V.1, Entry 18, ADJOURNMENT
- V.1, Entry 19, ADMINISTRATION
- V.1, Entry 20, ADMINISTRATIONS
- V.1, Entry 21, AFRICA
- V.1, Entry 22, AGE
- V.1, Entry 23, AGENT
- V.1, Entry 24, AGENTS
- V.1, Entry 25, AGIO
- V.1, Entry 26, AGIOTAGE
- V.1, Entry 27, AGRICULTURE
- V.1, Entry 28, ALABAMA
- V.1, Entry 29, ALABAMA CLAIMS
- V.1, Entry 30, ALASKA
- V.1, Entry 31, ALBANY PLAN OF UNION
- V.1, Entry 32, ALBANY REGENCY
- V.1, Entry 33, ALCALDE
- V.1, Entry 34, ALCOHOL
- V.1, Entry 35, ALGERIA
- V.1, Entry 36, ALGERINE WAR
- V.1, Entry 37, ALIEN AND SEDITION LAWS
- V.1, Entry 38, ALIENS
- V.1, Entry 39, ALLEGIANCE
- V.1, Entry 40, ALLEGIANCE
- V.1, Entry 41, ALLIANCE
- V.1, Entry 42, ALLIANCE
- V.1, Entry 43, ALLOYAGE
- V.1, Entry 44, ALMANACH DE GOTHA
- V.1, Entry 45, ALSACE-LORRAINE
- V.1, Entry 46, AMBASSADOR
- V.1, Entry 47, AMBITION
- V.1, Entry 48, AMENDMENTS TO THE CONSTITUTION
- V.1, Entry 49, AMERICA
- V.1, Entry 50, AMERICAN MERCHANT MARINE
- V.1, Entry 51, AMERICAN PARTY
- V.1, Entry 52, AMERICAN WHIGS
- V.1, Entry 53, AMES
- V.1, Entry 54, AMISTAD CASE
- V.1, Entry 55, AMNESTY
- V.1, Entry 56, AMNESTY
- V.1, Entry 57, ANAM
- V.1, Entry 58, ANARCHY
- V.1, Entry 59, ANCIEN RÉGIME
- V.1, Entry 60, ANDORRA
- V.1, Entry 61, ANHALT
- V.1, Entry 62, ANNEXATION
- V.1, Entry 63, ANNEXATIONS
- V.1, Entry 64, ANTI-FEDERAL PARTY
- V.1, Entry 65, ANTI-MASONRY
- V.1, Entry 66, ANTI-NEBRASKA MEN
- V.1, Entry 67, ANTI-RENTERS
- V.1, Entry 68, ANTI-SLAVERY.
- V.1, Entry 69, APPORTIONMENT
- V.1, Entry 70, APPROPRIATION.
- V.1, Entry 71, APPROPRIATIONS
- V.1, Entry 72, ARBITRAGE
- V.1, Entry 73, ARBITRARY ARRESTS
- V.1, Entry 74, ARBITRARY POWER
- V.1, Entry 75, ARBITRATION
- V.1, Entry 76, ARCHONS
- V.1, Entry 77, AREOPAGUS.
- V.1, Entry 78, ARGENTINE CONFEDERATION
- V.1, Entry 79, ARISTOCRACY.
- V.1, Entry 80, ARISTOCRATIC AND DEMOCRATIC IDEAS.
- V.1, Entry 81, ARITHMETIC
- V.1, Entry 82, ARIZONA
- V.1, Entry 83, ARKANSAS
- V.1, Entry 84, ARMISTICE
- V.1, Entry 85, ARMIES
- V.1, Entry 86, ARMY
- V.1, Entry 87, ARTHUR
- V.1, Entry 88, ARTISANS
- V.1, Entry 89, ARYAN RACES.
- V.1, Entry 90, ASIA
- V.1, Entry 91, ASSEMBLY (IN U. S. HISTORY)
- V.1, Entry 92, ASSESSMENTS
- V.1, Entry 93, ASSIGNATS
- V.1, Entry 94, ASSOCIATION AND ASSOCIATIONS
- V.1, Entry 95, ASYLUM
- V.1, Entry 96, ATELIERS NATIONAUX
- V.1, Entry 97, ATTAINDER
- V.1, Entry 98, ATTORNEYS GENERAL
- V.1, Entry 99, AUSTRALIA
- V.1, Entry 100, AUSTRIA-HUNGARY
- V.1, Entry 101, AUTHORITY
- V.1, Entry 102, AUTHORS
- V.1, Entry 103, AUTOCRAT
- V.1, Entry 104, AUTONOMY.
- V.1, Entry 105, AYES AND NOES
- V.1, Entry 106, BADEN
- V.1, Entry 107, BALANCE OF POWER
- V.1, Entry 108, BALANCE OF TRADE
- V.1, Entry 109, BALLOT
- V.1, Entry 110, BANK CONTROVERSIES
- V.1, Entry 111, BANKING
- V.1, Entry 112, BANK NOTES.
- V.1, Entry 113, BANKRUPTCY.
- V.1, Entry 114, BANKRUPTCY, National.
- V.1, Entry 115, BANKS.
- V.1, Entry 116, BANKS, Functions of.
- V.1, Entry 117, BANKS OF ISSUE
- V.1, Entry 118, BANKS, Advantages of Savings.
- V.1, Entry 119, BANKS, History and Management of Savings,
- V.1, Entry 120, BAR
- V.1, Entry 121, BARNBURNERS
- V.1, Entry 122, BARRICADE
- V.1, Entry 123, BARTER.
- V.1, Entry 124, BASTILLE
- V.1, Entry 125, BAVARIA
- V.1, Entry 126, BELGIUM
- V.1, Entry 127, BELL
- V.1, Entry 128, BELLIGERENTS
- V.1, Entry 129, BENTON
- V.1, Entry 130, BERLIN DECREE
- V.1, Entry 131, BILL
- V.1, Entry 132, BILL OF EXCHANGE
- V.1, Entry 133, BILL OF RIGHTS
- V.1, Entry 134, BILLION
- V.1, Entry 135, BILLS
- V.1, Entry 136, BI-METALLISM.
- V.1, Entry 137, BIRNEY
- V.1, Entry 138, BLACK COCKADE
- V.1, Entry 139, BLACK CODE.
- V.1, Entry 140, BLACK REPUBLICAN.
- V.1, Entry 141, BLAINE
- V.1, Entry 142, BLAIR
- V.1, Entry 143, BLOCKADE
- V.1, Entry 144, BLOODY BILL
- V.1, Entry 145, BLUE LAWS
- V.1, Entry 146, BLUE LIGHT
- V.1, Entry 147, BOARD OF TRADE.
- V.1, Entry 148, BOLIVIA
- V.1, Entry 149, BOOTY
- V.1, Entry 150, BORDER RUFFIANS
- V.1, Entry 151, BORDER STATES
- V.1, Entry 152, BOURGEOISIE
- V.1, Entry 153, BOUTWELL
- V.1, Entry 154, BRAHMANISM.
- V.1, Entry 155, BRAZIL
- V.1, Entry 156, BRECKENRIDGE
- V.1, Entry 157, BROAD SEAL WAR
- V.1, Entry 158, BROKERS
- V.1, Entry 159, BROOKS
- V.1, Entry 160, BROWN
- V.1, Entry 161, BUCHANAN
- V.1, Entry 162, BUCKSHOT WAR
- V.1, Entry 163, BUCKTAILS
- V.1, Entry 164, BUDDHISM
- V.1, Entry 165, BUDGET
- V.1, Entry 166, BULL
- V.1, Entry 167, BUNDESRATH
- V.1, Entry 168, BUREAUCRACY
- V.1, Entry 169, BURGESSES
- V.1, Entry 170, BURLINGAME
- V.1, Entry 171, BURR
- V.1, Entry 172, BUTLER, Benj. F.
- V.1, Entry 173, BUTLER, William Orlando
- V.1, Entry 174, CACHET
- V.1, Entry 175, CÆSARISM
- V.1, Entry 176, CALENDAR
- V.1, Entry 177, CALHOUN
- V.1, Entry 178, CALIFORNIA
- V.1, Entry 179, CANADA
- V.1, Entry 180, CANALS
- V.1, Entry 181, CANON LAW
- V.1, Entry 182, CAPITAL
- V.1, Entry 183, CAPITAL
- V.1, Entry 184, CAPITULATION
- V.1, Entry 185, CARICATURE
- V.1, Entry 186, CARPET BAGGERS
- V.1, Entry 187, CARTEL
- V.1, Entry 188, CASS
- V.1, Entry 189, CASUS BELLI
- V.1, Entry 190, CAUCUS
- V.1, Entry 191, CAUCUS SYSTEM
- V.1, Entry 192, CAUSE AND EFFECT IN POLITICS.
- V.1, Entry 193, CELIBACY, Clerical
- V.1, Entry 194, CELIBACY, Political Aspects of.
- V.1, Entry 195, CELTS.
- V.1, Entry 196, CENSURE.
- V.1, Entry 197, CENSURE OF MORALS.
- V.1, Entry 198, CENSURES
- V.1, Entry 199, CENSUS.
- V.1, Entry 200, CENTRALIZATION and DECENTRALIZATION.
- V.1, Entry 201, CEREMONIAL
- V.1, Entry 202, CHAMBER OF COMMERCE.
- V.1, Entry 203, CHARGÉ D'AFFAIRES.
- V.1, Entry 204, CHARITY, Private.
- V.1, Entry 205, CHARITY, Public.
- V.1, Entry 206, CHARITY, State.
- V.1, Entry 207, CHASE
- V.1, Entry 208, CHECKS AND BALANCES.
- V.1, Entry 209, CHEROKEE CASE
- V.1, Entry 210, CHESAPEAKE CASE.
- V.1, Entry 211, CHILI.
- V.1, Entry 212, CHINA
- V.1, Entry 213, CHINESE IMMIGRATION.
- V.1, Entry 214, CHIVALRY.
- V.1, Entry 215, CHRISTIANITY.
- V.1, Entry 216, CHURCH AND STATE
- V.1, Entry 217, CHURCH
- V.1, Entry 218, CHURCH
- V.1, Entry 219, CHURCH
- V.1, Entry 220, CHURCHES AND RELIGIONS
- V.1, Entry 221, CHURCHES
- V.1, Entry 222, CINCINNATI
- V.1, Entry 223, CIPHER DISPATCHES AND DECIPHERMENT
- V.1, Entry 224, CIRCULATION OF WEALTH.
- V.1, Entry 225, CITIES
- V.1, Entry 226, CITIES AND TOWNS.
- V.1, Entry 227, CIVIL ADMINISTRATION
- V.1, Entry 228, CIVIL LIST.
- V.1, Entry 229, CIVIL RIGHTS BILL
- V.1, Entry 230, CIVIL SERVICE REFORM
- V.1, Entry 231, CIVILIZATION
- V.1, Entry 232, CLAY
- V.1, Entry 233, CLEARING, AND CLEARING HOUSES
- V.1, Entry 234, CLERICALISM
- V.1, Entry 235, CLIENTÈLE AND CUSTOM
- V.1, Entry 236, CLIMATE
- V.1, Entry 237, CLIMATE
- V.1, Entry 238, CLINTON
- V.1, Entry 239, CLINTON, George
- V.1, Entry 240, CL�TURE
- V.1, Entry 241, COASTING TRADE
- V.1, Entry 242, COCHIN CHINA
- V.1, Entry 243, COINAGE
- V.1, Entry 244, COLFAX
- V.1, Entry 245, COLONIZATION SOCIETY
- V.1, Entry 246, COLORADO
- V.1, Entry 247, COLOMBIA
- V.1, Entry 248, COMMERCE.
- V.1, Entry 249, COMMERCIAL CRISES
- V.1, Entry 250, COMMISSION
- V.1, Entry 251, COMMITTEES
- V.1, Entry 252, COMMON LAW
- V.1, Entry 253, COMMONS
- V.1, Entry 254, COMMUNE
- V.1, Entry 255, COMMUNISM
- V.1, Entry 256, COMPETITION.
- V.1, Entry 257, COMPROMISES
- V.1, Entry 258, COMPULSORY CIRCULATION
- V.1, Entry 259, COMPULSORY EDUCATION
- V.1, Entry 260, CONCESSION
- V.1, Entry 261, CONCLAVE.
- V.1, Entry 262, CONCLUSUM
- V.1, Entry 284, CONSTITUTION OF THE UNITED STATES
- V.1, Entry 301, CONVENTION
- V.1, Entry 375, DISTILLED SPIRITS
- V.1, Entry 384, DOMINION OF CANADA
- V.2, Entry 7, EDUCATION
- V.2, Entry 18, EMBARGO
- V.2, Entry 33, EXCHANGE
- V.2, Entry 35, EXCHANGE OF PRISONERS
- V.2, Entry 37, EXCHANGE OF WEALTH
- V.2, Entry 121, GREAT BRITAIN
- V.2, Entry 130, HABEAS CORPUS
- V.2, Entry 180, INDUSTRIAL ARBITRATION AND CONCILIATION
- V.2, Entry 225, JUSTICE, Department of
- V.2, Entry 246, LAW
- V.2, Entry 364, NEW GRANADA
- V.2, Entry 379, NULLIFICATION
- V.3, Entry 4, OCEANICA
- V.3, Entry 29, PARIS MONETARY CONFERENCE
- V.3, Entry 32, PARLIAMENTARY LAW.
- V.3, Entry 116, RACES OF MANKIND
- V.3, Entry 137, REPUBLICAN PARTY
- V.3, Entry 155, ROMAN CATHOLIC CHURCH.
- V.3, Entry 195, SLAVERY
- V.3, Entry 278, UNITED STATES OF AMERICA
- V. 2, List of Writers
- V. 3, List of Writers
- V. 3, List of American Writers
CLEARING, AND CLEARING HOUSES.
Clearing is the settlement of mutual claims by the payment of differences. The total of the claims to be settled is the
clearings, and the differences are called
balances. Clearing house is a place where clearing is done.
—The greatest use of clearing is to facilitate the daily payment of the checks held by the banks of a city against one another. Clearing is used in Great Britain to adjust the complicated accounts of the through traffic of connecting railroads, and to simplify the fortnightly deliveries of stock on the London stock exchange. England has three bank clearing houses; France, one; Austria, one; Australia, one, and the United States, 28. There are two railway clearing houses, one in London for the English and Scotch railroads, and one in Dublin for the Irish railroads. The only stock exchange clearing house is in London.
Clearing between banks is a simple process, done in substantially the same way in all the clearing houses. At a certain hour in the morning every bank sends a
clerk and messenger to the clearing house, where each bank has its desk. Its clerk sits at this desk and receives from the messengers of all the other banks in turn, all the checks, or “exchanges,” held against it for payment. As the messengers deliver their exchanges they take receipts. When all the messengers have made the tour of the room each bank will have received through its clerk all the checks held against it by the other banks in the clearing house, and will have delivered through its messenger to every other bank all the checks, or “exchanges,” it holds for payment. If it receives more than it has delivered, it is a “debtor” bank, and has a balance to pay; if it delivers more than it has received, it is a “creditor” bank, and must be paid a balance. In the New York clearing house this process of delivering “exchanges” and taking receipts usually consumes about ten minutes. Without the clearing house, the messengers would need six to eight hours to do the same work. Proof sheets are made, under the supervision of the manager of the clearing house, to see that everything balances, and no clerk is allowed to leave until any error made has been discovered and corrected. At a later hour—before 1.30 in New York and 12.30 in Chicago—the debtor banks must pay to the clearing house for the creditor banks the balances due. It sometimes happens that, at the clearing, checks are delivered to a bank which it does not consider itself bound to pay. For these the clearing house makes no allowance. Balances must be paid as if the checks were all good. Claims arising from disputed checks are adjusted directly between the banks interested.
—In the London and Philadelphia clearing houses no money is used for the payment of balances. Every clearing house bank in London, and the clearing house itself, keep accounts with the bank of England, and differences are settled by transfers from one account to another. In the Philadelphia clearing house the debit balances are paid either by certificates issued by the assistant treasurer of the United States for legal tender notes deposited, or by certificates issued by the clearing house association for
gold deposited in their safe. Thus no loss can possibly occur in paying balances to the clearing house; the banks give their due bill for the odd amount under $5,000. These due bills the manager deposits in a bank and gives his checks to the creditor banks for the odd amounts due them. The manager who has had charge of the Philadelphia clearing house for over 23 years, Mr. George E. Arnold, has received and paid out over $3,000,000,000, and is not bothered with one cent of money. In the New York, Chicago, and other clearing houses generally, balances are settled in legal tender paper or coin, and to some extent in clearing house certificates.
—London originated the clearing house. It was formed spontaneously by the clerks of the London private bankers, who, to save themselves the trouble of going about to each bank, got into the habit of meeting in a room to settle their mutual claims. A similar practice arose among French merchants, in old times, of making their bills payable at the great annual fair at Lyons, where they met to balance their debts, and pay the differences. In this way, says Boisguillebert in his
Dissertation sur la Nature des Richesses, transactions to the amount of 80,000,000 francs were settled without the use of a sou in money. Edinburgh bankers claim the credit of having established the first clearing house. It was formed to put a stop to the malicious practice that had grown up among the rival banks of suddenly presenting large amounts of notes on each other in the hopes of forcing a suspension. An agreement was made to meet twice a week to adjust their respective claims, and no demands were to be made at any other times. In 1775, after the London bank clerks had cleared among themselves for some years, a common centre of exchange was agreed upon by the bankers—then all private—in Lombard street, in the City. Bankers in the West End cleared through the City banks, and this practice still continues. For 20 years after the joint stock banks had been formed, the jealousy of the private banks excluded them from the benefits of the clearing house, and they were not admitted until 1854, after the intolerable inconvenience to which they were subjected for the lack of clearing house facilities had driven them to plan a clearing house for themselves. The bank of England has never been admitted to the London clearing house. In 1810 the London clearing house numbered 46 members; in 1840, 29; and lately, but 26. In 1858, on the suggestion of Sir John Lubbock, the operation of the clearing house was extended, to include country bankers.
—Besides the London clearing house there are, in Europe, clearing houses at Manchester, (which Prof. Jevons thinks has a better method than is used at London), Newcastle, Vienna and Paris. At Paris, owing to the limited use of banking facilities and to the large proportion of settlements made through the bank of France, the clearings are no larger than in Cincinnati, St. Louis, or Baltimore. Melbourne, Australia, has a clearing house which ranks with the St. Louis clearing house in amount of clearings. Liverpool, though one of the greatest centres of commercial exchange in the world, has no clearing house proper, and the use of checks has been almost unknown there until within the last five years.
—The largest clearing house in the world is in the United States, and that country has the greatest number of clearing houses.
—New York now surpasses London, the oldest clearing centre. in the amount of its average daily clearings. In 1880 the total clearings of the London clearing house were, in dollars, $28,197,659,227; those of New York were $38,614,448,223.06. But the largest clearings in one day up to the end of 1880 were those of Nov. 17, at London, which amounted to $302,900,000. The transactions of the New York clearing house in 1880 were the
largest ever made in any room on earth, and exceeded the sum of the payments ($18,334,854,202) and the receipts ($18,570,348,647) of the United States government since its foundation. All this immense business was done without the loss of a cent, and with no errors. The largest clearings made in New York, before 1872, were $35,541,088,264, in 1869, when one-third of them were due to gold speculation. London’s largest clearings were $29,544,268,442 in the year 1873. The New York clearing house was founded Oct. 11, 1853, with 52 banks. This number was reduced after the panic of 1857, to 47; rose to 60 in 1873; in 1880 was 57; and in June, 1881, was 59, at which time the capital of the clearing house banks was $60,875,000. New York does 78 per cent, of all the clearings made in the United States.—”The American,” Mr. Ellis said, in his paper on ‘The Clearing House System,’ read before the English Bankers’ Institute, Feb. 16, 1881, “seems to be the character most suited to the adoption of centralizing and clearing principles.” There is a clearing house in every important city in the United States, and the smaller cities are rapidly adopting this financial labor-saving device. In 1853 the first American clearing house was started in the United States. In 1877 there were 23 clearing houses in the country, including 409 banks; and in 1880 there were 28 clearing houses, of which 26 contained an aggregate of 394 banks, with a capital and surplus of $336,895,432. Twenty-three of these reported their clearings, which footed up, in 1880, $50,724,616,647. The American clearing houses that report are those at New York, Boston, Philadelphia, Chicago, Cincinnati, St. Louis, Baltimore, New Orleans, San Francisco, Louisville, Pittsburg, Milwaukee, Providence, Indianapolis, Kansas City, Cleveland, Hartford, New Haven, Columbus, Worcester, Springfield, Lowell, and Syracuse. Those that do not report are at St. Joseph, St. Paul, Norfolk, Memphis, and Portland. The total clearings of all the American clearing houses since the establishment of that at New York, in 1853, down to the end of 1880, are, as far as reported, $701,127,832,344. Clearings not reported are estimated by Mr. Dudley P. Bailey at $9,000,000,000; making the grand total, $710,127,832,344.
—Clearing saves time, trouble and money. Mr. William A. Camp, manager of the New York clearing house, states that when it was formed, the banks were able to close 2,500 bank ledger accounts, in each of which numerous daily entries had to be made. The London and Westminster bank stated in evidence before the house of commons, that before they joined the clearing house they were obliged to keep in hand £150,000 in notes for negotiating their exchanges. The Bullion Report of 1810 records that 46 bankers in London made average daily clearings of £4,700,000, with a payment of only £220,000 in bank notes. Mr. Babbage shows in the Journal of the Statistical Society for March, 1856, that the clearings were made with the use of less than 4 per cent. in cash. In the New York clearing house, in 1880, the average daily exchanges were $121,000,000, and the average daily differences, or “balances,” paid in money, were $4,900,000, equal to 4 1/10 per cent, of the settlements. The gold coin actually paid through the clearing house in 1880 weighed 598 tons. Had all the payments made during the year been in gold coin, without the aid of clearing the gold used would have weighed 74,000 tons. (
The Public.) The ratio of balances paid in money to the clearing houses in different cities for a term of years were as follows: Boston, 11.8 per cent.; Philadelphia, 9; St. Louis, 20; Cincinnati, 14.5; New Orleans, 11.2; Milwaukee and Pittsburg, 18. Dudley P. Bailey calculates in the Bankers’ Magazine for June, 1881, that since the establishment of the clearing house system in this country it has effected exchanges amounting to the enormous sum of $710,000,000,000, with the use of only about $48,000,000,000, or 6.8 per cent. in money or certificates. All business movement is quickened by the clearing house. Before it was established in New York, the banks on account of the enormous labor involved, made their settlements but once a week. The clearing house makes settlements possible every day. Since the use of money has been discontinued in the London clearing house, two or three dozen clerks clear every day, without the use of a coin or note, checks and bills to the average amount of $100,000,000. If gold were to be used instead of the clearing house machinery the weight to be moved every day would be 200 tons, over distances varying from yards to miles.
—Something more than the economy of time, trouble and money is gained by the clearing house. It is developing a new economic and social force that will have mighty consequences. The clearing house establishes a fellowship between banks that has already proved in more than one crisis to be of great importance to the community and themselves. When the war of the rebellion broke out in the United States in 1861, the united action of the New York clearing house banks enabled the government to raise the funds with which to maintain its credit, and, as its manager, Mr. Camp, claims, the regularity and exactness of the clearing house machinery, and the union of the banks in the clearing house, were great factors in tiding over the financial embarrassments of those dark days. The New York clearing house banks, encouraged by their experience during the war, checked the demoralization of the panic of 1873 by combining their entire resources by the issue of loan certificates to the extent of over $25,000,000. Banks in the clearing houses have a disciplinary power over each other. One of the banks in a large American city was compelled by its associates to withdraw, in 1881, from the clearing house, on account of fraudulent returns of taxable deposits, made to the United States internal revenue commissioner. The constitution of the clearing house of New York city provides that for sufficient cause any bank whatever may be expelled from the clearing
house by a majority of its associates, and at the same time vests a still more summary power of instant suspension in a standing committee. Similar provisions are found in the constitutions of the clearing house of Chicago and other cities. In Philadelphia each member of the clearing house is required to make a full statement of its condition every day for the information of its associates, and in New York similar reports must be made weekly. Clearing houses usually have an arbitration committee to determine all disputes between banks submitted by both parties.
—Not less important is the effect of the publicity given, especially in America, to the clearing house returns, which are published daily in most of the cities.
—Every week a summary of the statements of the American clearing houses that make reports is prepared and telegraphed, with explanatory remarks, over a large part of the United States, by the associated press. These statements are looked for by business men and capitalists with as much interest as the weather reports. They are financial weather reports. This work of collation and explanation is done by Mr. Wm. M. Grosvenor, editor of
The Public, of New York, whose statistical genius was the first to see the application that could be made of these representative figures which reflect the changing conditions of business as closely as the barometer measures the pressure of the atmosphere. Bank clearings at London, New York, Chicago and elsewhere rose with the swelling tide of prosperity before the crash of 1873, sank with the industrial ebb that followed, and are now steadily rising all over the world.
Mr. Grosvenor’s weekly and yearly analyses of the American clearings show that they register the growth of cities, the rise and fall of speculation—in stocks at New York, of grain at Chicago, and of cotton at New Orleans. Clearings are affected by such episodes as the gold speculation in New York in 1869, with the collapse of Black Friday and the yellow fever in Memphis in 1879. Extraordinary winters like that of 1880-81, the cessation of navigation on the American lakes, the approach of the holidays, the condition of the money market and of general trade, such a shrinkage of prices in merchandise and stocks as took place in the spring of 1880—all these modify the figures of the clearing house. Declining yield in the great bonanza mines of Nevada affects the clearings of San Francisco; and a break in wheat, like that of December, 1880, the clearings of Milwaukee. Pittsburg clearings show the recovery of its great iron industry. The wheat corner in Chicago increases the clearings of July 1, 1881. When stock speculators, to produce a break in Wall street, flood the country with rumors of disaster to all business interests, the weekly reports of rising clearings disprove the false assertion and act a great part in the maintenance of confidence.
—The fullest compendium of clearing house statistics yet made may be found in Mr. Dudley P. Bailey’s article on “The Clearing House System,” Bankers’ Magazine, New York, June, 1881. Consult, also, the files of
The Public;Mr. Arthur Ellis’ paper on “The Clearing House System applied to Trade and Distribution,” read before the London Institute of Bankers, Feb. 16, 1881; Sir John Lubbock, in the Journal of the Statistical Society, September, 1865; Mr. Babbage, in same journal, March, 1856; Geo. H. Ellery’s “The Banks of New York, and the Panic of 1857”; article “Clearing House” in
Johnson’s Encyclopœdia, by W. A. Camp, manager New York clearing house, and the following in periodicals: “Clearing House of New York,” (J. S. Gibbons),
Bank. Mag. (N. Y.), 14:41; “Clearing House,”
Bank. Mag. (N. Y.). 8:344,445; 9:409; 32:341;
Internat. Rev., 3:395; “Clearing Houses in 1857-8,”
Bank. Mag. (N. Y.), 13:6; “Clearing House Associations,”
Bank.Mag.(N.Y.), 18:217; “Clearing House Methods,”
Bank. Mag. (N. Y.), 30:10; “Clearing House System,”
Bank. Mag. (N. Y.), 13:882; 29:929; “Clearing Houses of the U. S.,”
Bank. Mag. (N. Y.), 31: 332—
The Railway Clearing House. This is the most complex of all clearing houses. It determines the amount due each one of the many connecting railroads of Great Britain and Ireland for its part of the through freight and passenger business. It is independent of each company, but under the control of all. There are four main departments: merchandise; passengers and parcels; mileage of rolling stock; lost luggage. Employés at each station forward every week to the railway clearing house at London the through passenger tickets taken up, and every month make reports of the weight, destination and payment of through freight. At every railroad junction the clearing house has its agents, who make weekly reports of the number, condition and destination of every car that passes from one line to another. All these returns and the passenger tickets forwarded are cleared by the clearing house, which ascertains the balance due by or to each company. Balances on passenger business are payable within 5 days, and balances on freight business within 23 days after the receipt of the clearing house advices. These are sent out monthly to the companies. The railway clearing house arbitrates between the companies on claims for damages to rolling stock, or in cases of disputed liability on freight or passenger business. The processes of the railway clearing house are simple, but the vast amount of detail to be attended to requires the employment of a large central staff to check accounts, determine balances, and settle them. There are two railway clearing houses in Great Britain and Ireland, formed under the provisions of the railway clearing act of 1850. Ninety-three English and Scotch railways clear in London, in a building in Seymour street, near Euston station. The Irish railways have a clearing house in Dublin.
Stock Exchange Clearing House. The stock exchange, London, has the only stock exchange clearing house. Only a part of the members of the London stock exchange belong to it, and it clears for them alone. In the settlement of securities not transferable to bearer, it has caused little short of a revolution. Each broker who belongs to the clearing house submits a statement, and all but the balance of stock deliverable or receivable is canceled. The clearing house keeps a record of intermediate liabilities in case of dispute. The stock exchange clearing house system is not as perfect as that in other clearing houses, but it saves an immensity of trouble, and in departments of the London stock exchange where clearing is practiced, complaints of the onerousness of settling the half-monthly accounts are not as frequent as in those where it is not used.
H. D. LLOYD.