In the chapter dealing with this subject, it was shown that a well-organized banking system based upon centralized reserves implies a thorough-going system of domestic clearings or transfers. The importance of this was recognized in the original Reserve Act and was further emphasized in subsequent important amendments.

As clearing involves the balancing of credits against debits, in the absence of direct relations between debtors and creditors the process can be executed only through the intermediation of an agency standing between them and acting for both. Hence the Federal Reserve Law permits the Federal Reserve Board to require each reserve bank to act as a clearing house for its member banks, and it may also permit the reserve banks, for exchange purposes, to carry accounts with each other. The amendment of June 22, 1917, permits reserve banks to accept deposits for exchange purposes from non-member banks, which must, however, maintain balances sufficient to offset all items in transit held for their accounts by the reserve banks concerned.

The reserve banks must receive at par all remittances drawn on their own depositors that may be sent in for collection by member banks and by other reserve banks. Beyond this they may receive for collection maturing bills payable on presentation. This applies to bills payable anywhere when deposited by member banks, and to bills sent in by other reserve banks when such bills are payable somewhere within the district of the receiving bank. Furthermore, there is the interesting provision that one reserve bank may send as a credit to a second reserve bank items drawn against a third reserve bank or its member bank. The object of this provision is to permit three-cornered exchange whereby a given bank liquidates its indebtedness to a second bank by sending a credit payable at a third. The whole system of charges for such clearings is in general under the control of the Federal Reserve Board. In the original act there was the implication that member banks could not charge their patrons more than the actual expense involved in collecting or remitting funds, or in supplying exchange. Under the system actually put into practice by the Board some country bankers were deprived of considerable revenues formerly obtained from collection charges. They worked hard to get an amendment permitting them to make what they considered a fair charge. The Board opposed such a concession. While in June, 1917. the bankers succeeded in getting a collection-charge amendment, the Board in turn succeeded in getting the bankers proposal so worded that it is difficult to see that the bankers made any clear gain. The reasonable charges which the banks are authorized to make are "to be determined and regulated by the Federal Reserve Board." Furthermore "no such charge shall be made against the Federal Reserve Banks." The reserve banks will, however, be the largest remitters of items for collection in any organized, countrywide collection system.

Reserve banks may be clearing houses for members

To systematize the clearings between the reserve banks themselves, it is provided that the Federal Reserve Board may act as a clearing house for them, or it may designate one of the reserve banks to act in that capacity. Moreover to facilitate transfers, provision was made by an amendment adopted in June, 1917, for the receipt by the United States Treasury of deposits of gold coin or of gold certificates by reserve banks or by reserve agents for their several accounts with the Federal Reserve Board. These deposits are held subject to the Board's order, and the Board may direct that payment be made to any reserve bank or reserve agent. Deposits so made by the reserve banks may be considered a part of their required reserves. The basis of an effective clearing system would thus appear to be provided.