The Clearing House is a banking association and payments company owned by the largest commercial banks in the United States. The Clearing House is the parent organization of
The Clearing House Payments Company L.L.C., which owns and operates core payments system infrastructure in the United States, including ACH, wire payments, check image clearing, and real-time payments
[
] through the RTP network, a modern real-time payment system for the U.S.
Supporting services include The Clearing House Payments Authority (a payments association with over 1,000 financial institution members and corporate subscribers) and ECCHO (an entity develops and maintains rules that govern private sector check image exchange for its members, and also engages in lobbying and education).
Membership
Members of The Clearing House include
JPMorgan Chase & Co.,
Bank of America Corp.,
Citigroup Inc.,
Bank of New York Mellon Corp.
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Becaus ...
,
Deutsche Bank AG,
U.S. Bancorp and
Wells Fargo & Co.[Bob Ivry]
"Fed Loses Bid for Review of Bailout Disclosure Ruling"
Bloomberg News (August 23, 2010). Retrieved March 10, 2011 The Clearing House Payments Company, an organization owned by the same banks, was established in New York in 1853 for the purpose of processing transactions among banks.
The Clearing House. Retrieved August 29, 2011 It has offices in New York, North Carolina, Texas, and Michigan.
*
Bank of America
The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...
*
Bank of the West
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Barclays
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The Bank of New York Mellon
The Bank of New York Mellon Corporation, commonly known as BNY Mellon, is an American investment banking services holding company headquartered in New York City. BNY Mellon was formed from the merger of The Bank of New York and the Mellon Finan ...
*
Capital One
Capital One Financial Corporation is an American bank holding company specializing in credit cards, auto loans, banking, and savings accounts, headquartered in McLean, Virginia with operations primarily in the United States. It is on the li ...
*
Citi
Citigroup Inc. or Citi (stylized as citi) is an American multinational investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking giant Citicorp and financial conglomer ...
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Citizens
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Comerica
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Deutsche Bank
Deutsche Bank AG (), sometimes referred to simply as Deutsche, is a German multinational investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Sto ...
*
Fifth Third Bank
Fifth Third Bank (5/3 Bank), the principal subsidiary of Fifth Third Bancorp is an American bank holding company headquartered in Cincinnati, Ohio. Fifth Third is one of the largest consumer banks in the Midwestern United States, Fifth Third ...
*
HSBC
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Huntington
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JPMorgan Chase
JPMorgan Chase & Co. is an American multinational investment bank and financial services holding company headquartered in New York City and incorporated in Delaware. As of 2022, JPMorgan Chase is the largest bank in the United States, the ...
*
KeyBank
KeyBank, the primary subsidiary of KeyCorp, is a regional bank headquartered in Cleveland, Ohio, and is the only major bank based in Cleveland. KeyBank is one of the largest banks in the United States.
Key's customer base spans retail, small b ...
*
M&T Bank
M&T Bank Corporation (Manufacturers and Traders Trust Company) is an American bank holding company headquartered in Buffalo, New York. It operates 1680 branches in New York, New Jersey, Connecticut, Pennsylvania, Maine, Maryland, Massachusetts ...
*
MUFG Union Bank
MUFG Union Bank (stylized as UnionBank), is a nationally chartered full-service bank with 398 branches in California, Washington and Oregon which was wholly owned by MUFG Americas Holdings and has been acquired by U.S. Bancorp. Formerly known ...
*
PNC
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Regions Bank
Regions Financial Corporation is a bank holding company headquartered in the Regions Center (Birmingham), Regions Center in Birmingham, Alabama. The company provides retail banking and commercial banking, trust, stockbrokerage, and mortgage se ...
*
Santander
Santander may refer to:
Places
* Santander, Spain, a port city and capital of the autonomous community of Cantabria, Spain
* Santander Department, a department of Colombia
* Santander State, former state of Colombia
* Santander de Quilichao, a m ...
*
TD Bank
Toronto-Dominion Bank (french: links=no, Banque Toronto-Dominion), doing business as TD Bank Group (french: links=no, Groupe Banque TD), is a Canadian multinational banking and financial services corporation headquartered in Toronto, Ontario. ...
*
Truist
*
U.S. Bank
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Wells Fargo
Wells Fargo & Company is an American multinational financial services company with corporate headquarters in San Francisco, California; operational headquarters in Manhattan; and managerial offices throughout the United States and intern ...
Lawsuits
In September 2009, the Clearing House joined a lawsuit in support of the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
after a
federal court in New York ruled against the Fed.
Filed by
Bloomberg News
Bloomberg News (originally Bloomberg Business News) is an international news agency headquartered in New York City and a division of Bloomberg L.P. Content produced by Bloomberg News is disseminated through Bloomberg Terminals, Bloomberg Tele ...
under the
Freedom of Information Act Freedom of Information Act may refer to the following legislations in different jurisdictions which mandate the national government to disclose certain data to the general public upon request:
* Freedom of Information Act 1982, the Australian act
* ...
, the lawsuit,
Bloomberg L.P. v. Board of Governors of the Federal Reserve System, sought records showing where the Fed had lent $2
trillion
''Trillion'' is a number with two distinct definitions:
* 1,000,000,000,000, i.e. one million million, or (ten to the twelfth power), as defined on the short scale. This is now the meaning in both American and British English.
* 1,000,000,000,0 ...
of taxpayer funds during the
bank bailout of the
financial crisis of 2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of fi ...
. The Clearing House has filed an appeal before the
United States Supreme Court
The Supreme Court of the United States (SCOTUS) is the highest court in the federal judiciary of the United States. It has ultimate appellate jurisdiction over all U.S. federal court cases, and over state court cases that involve a point o ...
on October 26, 2010. The case was appealed but ultimately rejected on March 21, 2011. The Federal Reserve was required to release the data within five days to Bloomberg L.P.
The Clearing House was also sued by the
State of New York
New York, officially the State of New York, is a state in the Northeastern United States. It is often called New York State to distinguish it from its largest city, New York City. With a total area of , New York is the 27th-largest U.S. state ...
in
Andrew Cuomo v. Clearing House Association, LLC to determine whether the
U.S. Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and t ...
's
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency (OCC) is an independent bureau within the United States Department of the Treasury that was established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all natio ...
(OCC) had the authority to preempt a state's right to enforce its own fair lending laws against national banks. A 5–4 decision by the
Supreme Court overturned previous lower court decisions that had ruled in favor of the Clearing House and the OCC.
History
![The New York Clearing House, Oval Table](https://upload.wikimedia.org/wikipedia/commons/5/51/The_New_York_Clearing_House%2C_Oval_Table.jpg)
The New York Clearing House Association was a
clearinghouse bank established in
New York City
New York, often called New York City or NYC, is the most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the most densely populated major city in the Un ...
in 1853. Initially, it simplified the chaotic settlement process among the banks of
New York City
New York, often called New York City or NYC, is the most populous city in the United States. With a 2020 population of 8,804,190 distributed over , New York City is also the most densely populated major city in the Un ...
. The New York Clearing House functioned as a
quasi-central bank: setting monetary policy, issuing a form of currency, and even storing vaults of gold to back settlements. It later served to stabilize
currency
A currency, "in circulation", from la, currens, -entis, literally meaning "running" or "traversing" is a standardization of money in any form, in use or circulation as a medium of exchange, for example banknotes and coins.
A more general ...
fluctuations and bolster the
monetary system
A monetary system is a system by which a government provides money in a country's economy. Modern monetary systems usually consist of the national treasury, the mint, the central banks and commercial banks.
Commodity money system
A commodity m ...
through recurring times of panic. Since the creation of the
Federal Reserve System
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
in 1913, it has used technology to meet the demands of an increasingly complex banking system.
Before 1853
In the decade before the Clearing House was founded, banking had become increasingly complex. From 1849 to 1853 –years highlighted by the
California gold rush and construction of a national railroad system–the number of New York banks increased from 24 to 57. Settlement procedures were unsophisticated, with banks settling their accounts by employing porters to travel from bank to bank to exchange checks for bags of coin, or “specie.” As the number of banks grew, exchanges became a daily event. The official reckoning of accounts, however, did not take place until Fridays, often resulting in record keeping errors and encouraging abuses. Each day, the porters would gather on the steps of one of the
Wall Street banks for their “Porters’ Exchange.”
Founding, 1853
![New York Clearing House](https://upload.wikimedia.org/wikipedia/commons/f/f1/New_York_Clearing_House.png)
In 1853, a bank bookkeeper named George D. Lyman proposed in an article that banks send and receive checks at a central office. There was a positive response and The New York Clearing House was organized officially on October 4 of that year. One week later, on October 11 in the basement of
14 Wall Street
Fourteen or 14 may refer to:
* 14 (number), the natural number following 13 and preceding 15
* one of the years 14 BC, AD 14, 1914, 2014
Music
* 14th (band), a British electronic music duo
* ''14'' (David Garrett album), 2013
*''14'', an unrelea ...
, 52 banks participated in the first exchange. On its first day, the Clearing House exchanged checks worth $22.6 million. Within 20 years, the average daily clearing topped $100 million. The current daily average approaches $2 Trillion.
The New York Clearing House brought order to what had been a tangled web of exchanges. Specie certificates soon replaced gold as the means of settling balances at the Clearing House, further simplifying the process. Once certificates were
exchanged for gold deposited at member banks, porters encountered fewer of the dangers they had faced previously while transporting bags of gold from bank to bank. Certificates relieved the strain on the bank's cash flow, thus reducing the likelihood of a run on deposits. Member banks had to do weekly audits, keep minimum reserve levels and log daily settlement of balances which further assured more ordered, efficient exchanges.
Calming the panics, 1853-1913
Between 1853 and 1913, the U.S. experienced rapid economic expansion as well as ten financial panics. One of the Clearing House's first challenges was the
panic of 1857. When the panic began, leaders of the member banks met and devised a plan that would shorten the duration of the panic–and more importantly, maintain public confidence in the banking system. When specie payments were suspended, the Clearing House issued loan certificates that could be used to settle accounts. Known as Clearing House Loan Certificates, they were, in effect, quasi-currency, backed not by gold but by discounted county and state bank notes held by member banks. Bearing the words “Payable Through the Clearing House,” a Clearing House Loan Certificate was the joint liability of all the member banks, and thus, in lieu of specie, a most secure form of payment.
The certificates appeared in smaller denominations during the
panic of 1873
The Panic of 1873 was a financial crisis that triggered an economic depression in Europe and North America that lasted from 1873 to 1877 or 1879 in France and in Britain. In Britain, the Panic started two decades of stagnation known as the ...
, and continued to be used as a substitute currency among the member banks for settlement purposes during panics in subsequent decades, including the
Panic of 1893. Although they represented a potential violation of federal law against privately issued currencies, these certificates, as a contemporary observer noted, “performed so valuable a service…in moving the crops and keeping business machinery in motion, that the government…wisely forbore to prosecute.”
In 1913, Congress passed the
Federal Reserve Act
The Federal Reserve Act was passed by the 63rd United States Congress and signed into law by President Woodrow Wilson on December 23, 1913. The law created the Federal Reserve System, the central banking system of the United States.
The Pani ...
, thus creating an independent, federal clearing system modeled on the many private clearing houses that had sprung up across America. The new monetary system, with its stringent audits and minimum reserve standards, assumed the role that clearing houses had played.
Clearing process during the 20th century
Since the inception of the Federal Reserve System, the New York Clearing House has concentrated on facilitating the smooth completion of financial transactions by clearing the payments. The clearing process, while highly structured, is in theory, quite simple. Member banks exchange checks, coupons and other certificates of value among themselves, after which the Clearing House records the resulting charges to their accounts. Entries are posted on the books of the
Federal Reserve Bank of New York to settle any differences. Settlement is prepared each business day at 10:00 a.m. after about three million pieces of paper have been presented for payment.
Computers have been performing the payment clearing that once required paper processing. The Clearing House Interbank Payments System (CHIPS) began operation in 1970. The New York Automated Clearing House (NYACH) followed in 1975 and became the Electronics Payment Network in 2000. The Clearing House Electronic Check Clearing System (CHECCS) was added in 1992.
On July 1, 2004, The New York Clearing House Association announced a name change to The Clearing House Association L. L. C..
''The Law of Electronic Funds Transfers''
by Benjamin Geva
See also
* ACH
* Bankers' clearing house
Cheque clearing (or check clearing in American English) or bank clearance is the process of moving cash (or its equivalent) from the bank on which a cheque is drawn to the bank in which it was deposited, usually accompanied by the movement of the c ...
* Clearing house
Clearing house or Clearinghouse may refer to:
Banking and finance
* Clearing house (finance)
* Automated clearing house
* ACH Network, an electronic network for financial transactions in the U.S.
* Bankers' clearing house
* Cheque clearing
* Cl ...
* Clearing House Interbank Payments System
The Clearing House Interbank Payments System (CHIPS) is a United States private clearing house for large-value transactions. By 2015, it was settling well over US$1.5 trillion a day in around 250,000 interbank payments in cross border and domestic ...
* History of central banking in the United States
This history of central banking in the United States encompasses various bank regulations, from early wildcat banking practices through the present Federal Reserve System.
1781–1836: Bank of North America and First and Second Bank of the Uni ...
* Suffolk Bank Suffolk Bank was a private clearinghouse bank in Boston, Massachusetts, that exchanged specie or locally backed bank notes for notes from country banks to which city-dwellers could not easily travel to redeem notes. The bank was issued its corpor ...
References
External links
Official Site
* ttp://www.theclearinghouse.org/index.html?f=072298 American Banker feature on The Clearing House.
''Laying of the corner stone and opening ceremonies of the new building of the New York Clearing House in Cedar Street''
Publisher: J.J. Little & Co., Printers, New York 1896 - Internet Archive - online
New York Clearing House Association records, 1853-2006
Columbia University Libraries Archival Collection
Further reading
*
{{DEFAULTSORT:Clearing House Association, LLC
Banking in the United States
Lobbying organizations in the United States