elastic currency, but what is needed is more elasticity in the assets of the banks. What is wanted are assets that are readily convertible into cash in times of panic, and which will pay depositors, as well as permit new loans. In such times banks need expansion in the right direction, and not contraction. Cash settlements in all the clearing-houses of the United States would be conducive to better banking, for, under this rule, the clearing-house banks would be obliged to keep themselves prepared at all times to meet large drafts upon them through the clearings. On the other hand, when clearings are settled by drafts upon financial centres, if the banks are not prepared for emergencies, they borrow from the institutions in those centres, and sometimes thereby expand themselves beyond prudent limits.

Bank officers often loan money to manufacturing corporations, which invest the same in plant, and are for this reason unable to meet their notes when due. Such loans become fixed assets of the bank, and are not available in times of financial stringency. The banks thereby become, to a certain extent, stockholders in the corporations. If the banks compel the payment of such loans in times of trouble, they thereby restrict the operations of the manufacturing concerns, throw men out of employment, and thus disarrange the entire industrial system of the community.

Banks are often led to invest their money in unavailable assets, simply because they feel that they will not be called upon to pay any large amount of cash, either to their depositors direct, or through the clearing-house. Consequently, the settlement of balances in anything but

cash, or its equivalent, is liable at times to affect the whole economic condition of the community. If a careful study were to be made of the most prosperous of our interior cities, it would be found that the banks in those cities settle their clearing-house balances on a cash basis.

Cash settlements at the clearing-houses of interior cities would compel the banks to keep more money in their vaults. This would enable them more readily to meet the requirements of their customers. The need of outside assistance would be, in a measure, removed, and thereby all the financial institutions of the country would be kept upon a more even basis.

Some of the large clearing-houses would find it advantageous to provide depositories in which currency of all denominations could be deposited in vaults, and certificates issued therefor, that could be used in the settlement of balances. Then, during the crop-moving periods, and at other times when there is a demand for small bills, they could be supplied from the clearing-house vaults. By such an arrangement the banks would not be obliged, as has often been the case, to give up one form of money which they desire to keep for the sake of procuring another form, and therefore they would be able to work to a greater or lesser extent independently of the sub-treasuries.

These and many other matters might be taken up by clearing-houses, and brought to the same degree of perfection as the loan certificate, an instrumentality which has been of inestimable value to the business world.

CHAPTER V

THE ADMINISTRATION OF CLEARING-HOUSES

List of Officials-Duties of Officers-Committees-Annual Meetings Plan of Administration in Canada-Duties of Officers and Committees.

The government of a clearing-house association in the United States is theoretically vested in a president, a vicepresident, a secretary, a treasurer, a manager, and a clearing-house committee, sometimes termed the committee of management, or the executive committee. Not every association, however, is as completely officered as this. In fact, there are many associations that do not have the full list of officials named. A president, a manager, and an executive committee, however, are found in the organization of nearly every clearing-house association, for these functionaries are practically indispensable. The other officials mentioned are lacking in various associations, especially in those located in the smaller cities, their duties being performed by some of the other officers.

It is the duty of the president to preside at all the meetings of the association. As a rule, he has power to call special meetings whenever he may deem it advisable, and must do so upon the request of a specified number of the members. He exercises a general supervision over clearing-house affairs, and performs the duties usually de

volving upon an executive officer. In many cases he is ex-officio chairman of the clearing-house committee and of all standing committees. He is elected annually, with very few exceptions, and serves without compensation.

The vice-president performs the duties of the president in the latter's absence. The duties of secretary and treasurer are frequently performed by the manager. The secretary keeps the record of the proceedings of the meetings of the association, and performs all the duties usually pertaining to that office.

The treasurer must account for the funds intrusted to his keeping, and must pay out the same upon the written order of the president, countersigned by the manager, or, if the latter be at the same time treasurer of the association, then upon the written order of the clearing-house committee, or upon any other authority that the association may designate.

The manager is either elected by the association or appointed by the executive committee to serve, as a rule, one year, although almost invariably he is re-elected from year to year for an indefinite period. In some of the large cities a heavy bond with sureties is required of the manager, varying in amount from ten thousand dollars to twenty thousand dollars. In cities where no cash is used in the settlement of balances, there is, of course, much less opportunity for fraud on the part of the manager, and hence in such cases, as a rule, no bond is demanded. In many of the smaller cities, where the manager's duties and responsibilities are light, and where he is regularly employed in some other capacity, his services are not infrequently gratuitous.

The manager has immediate charge of all business at the clearing-house, subject to the control of the clearinghouse committee. The employees and the settling clerks and messengers from the banks, while at the clearinghouse, are under his immediate direction. He imposes and collects fines for violations of the rules of the association, has supervision of all the records of clearances and settlements, and sees that the clearing-house and the property connected therewith are kept in order. He makes such annual reports and performs such other duties as may be required of him.

The clearing-house committee is usually composed of three members chosen from the most capable and experienced bankers in the association. In one case which has come to notice, the membership of this committee consists of only two. It sometimes exceeds three, as at New York and Philadelphia, in each of which cases there are six members besides the president, who is a member ex-officio.

The clearing-house committee is elected annually, and is by far the most important of all the committees. In it is vested almost absolute power, the direction of practically the whole machinery of the clearing-house resting in its hands. It is empowered by the association to procure suitable rooms for the clearing-house, to provide proper books, stationery, fuel, furniture, and whatever else may be necessary for the convenient transaction of business; to appoint a manager, except where this power is directly exercised by the association, and generally to supervise affairs. It draws on the members for their share of the expenses, fixes the salaries of the clerks in