Clearing arrangements in the United States before the Federal Reserve System

Warren Weber

No 695, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: This paper examines two different clearing arrangements for bank liabilities. One was a profit-maximizing private entity, the Suffolk Banking System. It cleared notes for New England banks between 1827 and 1858. The other was a nonprofit collective, the clearinghouses organized in many cities beginning in 1853. The paper examines how well these arrangements prevented bank failures and acted as lenders of last resort. It finds the Suffolk system had fewer failures but acted less like a lender of last resort. It argues that these differences can be explained by the different incentives facing the Suffolk Bank and the members of clearinghouses.

Date: 2012
New Economics Papers: this item is included in nep-his
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:695

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