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All of which is respectfully submitted by the committee.

GEO. S. COE,

President American Exchange National Bank.

GEO. H. POTTS,

President National Park Bank.

JOHN JAY KNOX,

President National Bank of the Republic.
R. L. EDWARDS,

President National Bank of the State of New York.
JAMES T. WOODWARD,

President Hanover National Bank.

F. A. PALMER,

President National Broadway Bank.

WM. L. JENKINS,

President Bank of America.

A minority report, dissenting from the above, was as follows:

The undersigned member of the committee appointed June 4, 1884, and continued on July 8 with three members added "to inquire if the methods of business (in respect especially as to payment of interest on deposits and the receiving of checks on out-of-town places as cash) as conducted by the several members of this association are uniform, etc.," begs leave to report as the result of his individual inquiry:

First. That the vital principle of the business of banks of deposit and discount lies in the gathering together of temporarily idle funds into a center where they can be made useful for the common good; that the payment of interest and negotiation of exchange, drafts, checks, etc., have been among the means employed for this purpose from time almost immemorial by all commercial nations and communities; and that the methods of business as conducted by the members of this association in this respect are substantially uniform, 69 out of 72 banks in this city paying interest and all receiving checks on out-of-town places as cash for deposit.

Second. That the infinite mulitplicity and variety of the combinations and complications which arise in the transactions of the business of a great commercial country and a great commercial city, between banks and their correspondents, the intimate confidential personal relations between banks and their individual customers, make it absolutely necessary that there should be the utmost possible freedom of action between them; that a faithful compliance with our national and state laws will secure perfect safety for all.

Third. That the total abolition of the payment of interest upon or allowance of any compensation or consideration in any form, directly

or indirectly, for deposits, as also the receiving of checks or drafts on other cities as cash by an agreement of this association, would be productive of great and lasting injury to the city of New York, endangering and retarding its commercial prosperity and also to the United States; that such an agreement is impracticable, and if made would be found impossible of enforcement by the association or execution by its individual members.

It is therefore respectfully recommended that the further consideration by this association of these matters be indefinitely postponed.

Respectfully submitted.

O. D. BALDWIN,

President Fourth National Bank.

CLEARING-HOUSE LOAN CERTIFICATES IN 1890."

The effect of a general monetary stringency is felt first and most seriously by banks located in the larger of the reserve cities. Whenever financial affairs are in a normal condition the surplus funds of the local banks find their way to the vaults of their correspondent banks located in the great centers of business activity. This is undoubtedly due in part to the fact that these deposits may be made available for lawful money reserve and that a small rate of interest is, as a rule, paid upon bank balances by associations in the larger cities, and to the further fact that the maintenance of a good balance with their city correspondents strengthens the claim of the interior banks upon the former for rediscounts when the temporary condition of redundancy passes away and the increased demand for money is greater than the interior banks from their resources can conveniently supply.

Thus it results that the wants of a continent in case of general depression are at last brought through various channels of business activity, by way of withdrawals or loans, to the bankers of the great metropolitan cities for relief, and they are presented in such a form, in many cases, as to preclude the possibility of refusal, if general bankruptcy is to be avoided.

During the period of the stringency above discussed the cities of New York, Philadelphia, and Boston were subjected to the most pressing demands, and after very care

• Report of the Comptroller of the Currency, 1891, pp. 12-15.

ful consideration it was decided by the associated banks that the exigency made necessary a resort to the issuing of clearing-house loan certificates for the purpose of settling clearing-house balances. This expedient had been successfully resorted to during the panics of 1873 and 1884.

At a meeting of the New York Clearing House Association on the 11th day of November, 1890, the following resolution was unanimously adopted:

Resolved, That a committee of five be appointed by the chair, of which the chairman shall be one, to receive from banks members of the association bills receivable and other securities, to be approved by said committee, who shall be authorized to issue therefor, to such depositing banks, loan certificates bearing interest at 6 per cent per annum, and in addition thereto a commission of one-quarter of 1 cent for every thirty days such certificates shall remain unpaid, and such loan certificates shall not be in excess of 75 per cent of the market value of the securities or bills receivable so deposited, and such certificates shall be received and paid in settlement of balances at the clearing house.

Under this resolution a committee of five was appointed, and they proceeded, upon deposit of proper securities, to issue to applying banks loan certificates in the following form:

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has deposited with

This certifies that the this committee securities in accordance with the proceedings of a meeting of the association held November 11, 1890, upon which this certificate is issued. This certificate will be received in payment of balances at the clearing house for the sum of twenty thousand dollars from any member of the Clearing House Association.

On the surrender of this certificate by the depositing bank above named the committee will indorse the amount as a payment on the obligation of said bank held by them and surrender a proportionate share of the collateral securities held therefor.

($20,000.)

Committee.

These certificates were, by unanimous agreement upon the part of the clearing-house banks, accepted in lieu of money in the settlement of clearing-house balances.

In order to provide for the retirement of these securities in case the collaterals pledged were found insufficient, the several boards of directors of the associated banks were requested to, and did, pass a resolution in the following form:

Resolved, That any loss resulting from the issue of loan certificates shall be borne by the banks comprising the Clearing House Association pro rata of capital and surplus, and this resolution shall be ratified by the boards of the respective banks members of the association, and a certified copy of such consent delivered to the chairman of the loan committee.

This committee, acting under the authority granted by the above resolution, issued to the associated banks loan certificates aggregating $16,645,000. The first issue was made November 12, 1890, and the entire issue was retired on February 7, 1891. The largest amount outstanding at any one time was $15,205,000, on the 13th of December, 1890.

On the 17th of November, 1890, similar proceedings were had by the Boston Clearing House Association. On that day, at a meeting of the association, the following resolution was unanimously adopted:

Resolved, That a committee of five be appointed by the chair, of which committee the chairman shall also be a member, to receive from banks members of the association bills receivable and other securities, to be approved by said committee, who shall be authorized to issue therefor, to such depositing banks, loan certificates bearing interest at 7.3 per cent per annum, and such loan certificates shall not be in excess of 75 per cent of the market value of the securities or bills receivable so deposited, and such certificates shall be received and paid in settlement of balances at the clearing house.

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