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Fighting Financial CrisesLearning from the Past$
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Gary B. Gorton and Ellis W. Tallman

Print publication date: 2018

Print ISBN-13: 9780226479514

Published to Chicago Scholarship Online: May 2019

DOI: 10.7208/chicago/9780226479651.001.0001

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What the New York Clearing House Did during National Banking Era Panics

What the New York Clearing House Did during National Banking Era Panics

(p.37) 4 What the New York Clearing House Did during National Banking Era Panics
Fighting Financial Crises

Gary B. Gorton

Ellis W. Tallman

University of Chicago Press

With the start of a panic the clearing house took two actions. First, individual member banks were instructed to stop publishing the information normally required to be published in a newspaper, balance sheet items. Second, the clearing house authorized the issuance of “clearing house loan certificates”, a liability of the entire clearing house membership. Thus, the clearing house legally bound itself to be one institution. Individual banks took collateral to a clearing house committee and obtained loan certificates, which could then be used to replace currency in the clearing process. And later small denomination loan certificates were used as a hand-to-hand currency.

Keywords:   crisis start, clearing house loan certificates, collateral, panics of 1884 and 1890, suspension of convertibility

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