This section is from the "Practical Banking" book, by Albert S. Bolles.
It was found, on inquiry, that as a National bank cannot subscribe to the stock of another National bank, the proposed plan was not feasible. The steady increase of the business, however, again forced the matter upon the attention of the Association. Another committee was chosen, consisting of Messrs. George Ripley, John Cummings, Charles A. Vialle, A. L. Newman, and Walter S. Blanchard, representing, respectively, the Hide & Leather, Shawmut, Republic, Commonwealth, and Metropolitan National banks. This committee, in November, 1883, reported unanimously in favor of establishing an agency similar to the Clearing-house, which should have no capital and make no charge for its services, but whose expenses should be borne by the banks in proportion to the business done. On account of the expense attending such an organization this plan was defeated. The whole matter remains, therefore, in its previously unsettled condition. Mr. C. B. Patten, Cashier of the State National Bank, has suggested that the banks contract with one of their number to undertake this business for all, as more economical than the proposed Clearing-house for country checks, since an established bank "is already in possession of the ' plant' necessary for the transaction of such business, and could make money out of it, with a charge for exchange which would not support an independent Clearing-house." The unwillingness of the banks to expose their business to one of their number, or to give the collecting bank the advantage it would thus enjoy for obtaining country deposits, is likely to interpose a serious obstacle to the adoption of this plan.
The matter of country collections has also been discussed by the bankers of Pittsburgh and vicinity, where Mr. E. B. Isett, President of the Altoona Bank, submitted a plan for the formation of a Clearing-house among the country banks themselves, at some central point, by which the daily settlements could, it is claimed, be effected with nearly as much celerity for a district reached by one day's mail as in the Clearing-house of a city. Such an institution could but be a source of union and strength to the banks themselves, as well as a great convenience to the business community. It would enable the banks to exert a coercive power over those that refused to take part in the movement by rejecting their checks. These Clearing-houses would furnish an easy means of communication between banks in different parts of the country, and establish on a permanent basis, the system of par redemption for country checks at certain central points. The great difficulty with this plan is to arouse the country banks to a sense of their duty in the matter. Under the present system they enjoy, at the expense of banks at the great centers, all the advantages of par redemption of their checks. It is not just that the city banks alone should bear this expense. The receipt of country checks at par by banks in the great cities is a matter of common interest, not to them alone, but to the country banks and to their customers alike, and all should be required to share the necessary cost.
The commercial unity of the country demands a recognition in all business arrangements. Isolated action on the part of individual banks cannot permanently cope with the problem now before us. Concerted action among the banks at the principal commercial centers is necessary. If all cannot be induced to unite at first, let enough join in some common movement to give it a strength and prestige that shall gradually bring all into the arrangement. Those who are familiar with the history of the Suffolk Bank system for the par redemption of New England bank notes know what bitter opposition that system at first encountered on the part of the country banks. The Suffolk Bank, with the six banks which first inaugurated the movement, was styled in derision the "Holy Alliance," and sometimes the "Six-tailed Bashaw." Yet the system finally triumphed over all opposition, and became firmly established, to the great benefit of the country banks themselves. For forty years this system gave a unique and peculiar character to New England banking, by virtue of which New England bank notes attained, even in remote parts of the Union, a credit which was frequently refused to the issues of the local banks. The countrv banks will, no doubt, now cling to the small benefits they derive from the delays in presenting checks, and the charges they impose for exchange, until they can be made to take a broader view, and measure at their true value the indirect advantages which they themselves will realize from a comprehensive and liberal policy in extending increased business facilities to their customers. The internal commerce of the country should not be subjected to a tax on transactions between city and country nine times as great as the stamp tax on checks. This is one of the very evils that existed in England before the establishment of the country clearing. The latter has proved a complete remedy there as it would no doubt here. The details of some working plan must be elaborated by the bankers themselves, but that business is fast outgrowing the present system, if it has not already outgrown it, is a proposition which will receive very general assent.
As some of the Clearing-houses have until within a few years made no returns, while others have only recently begun to make up their statements by calendar years, an entirely accurate comparative statement cannot be given. The following shows approximately the stupendous growth of the system in this country:—
No. of Associations.
United States. Millions.
New York. Millions.
* $ 1,304,9
* Three months only.