Clearing House Association

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The Clearing House Association, L.L.C. is a New York-headquartered trade group and the nation’s first and oldest banking association representing 24 of the world's largest commercial banks, which collectively employ over two million people and hold more than half of all U.S. deposits. It is a nonpartisan organization that advocates on regulatory, legislative, and legal public policy issues on behalf of its owner banks before policymakers, courts of law, and standards setters in the U.S. and abroad.

Contents

The Clearing House comprises two organizations: The Clearing House Payments Company and The Clearing House Association. The Clearing House has offices in New York, North Carolina and Washington, D.C.. The Clearing House Association seeks a level playing field among similarly situated market participants, in which a legal and regulatory framework promotes systemic stability, economic growth, and a safe and sound banking system. Unique among trades for its sole focus on large-scale commercial banking and payments issues, the Association and its Owner Banks form strong consensus positions on issues vital to the banking industry that are technically detailed and research- and data-driven.

The Clearing House Payments Company L.L.C. (PayCo) is a U.S.-based limited liability company formed by Clearing House Association. PayCo is a private sector, payment system infrastructure that operates an electronic check clearing and settlement system (SVPCO), a clearing house, and a wholesale funds transfer system (CHIPS).

Publications

The Association publishes a quarterly journal entitled Banking Perspective, which is a forum for thought leadership on key themes in the bank regulatory landscape and innovation trends in bank payments. Banking Perspective features leading banking industry executives, regulators, academics, policy experts, industry observers, and others.

The Annual Conference

The Association holds a yearly conference which seeks to provide a forum for industry leaders to examine the bank regulatory and payments landscape in the post-Dodd-Frank era. The conference generally features two days of keynote speakers, in-depth expert panels on pressing issues facing commercial banks, and provides professional networking opportunities. Workshops and panels generally run across two thematic tracks – the changing financial regulatory landscape and the dynamic world of evolving payments technology. Past keynote speakers have included Rob Cordray, Thomas Curry, Martin Gruenberg, William Dudley, Daniel Tarullo, Rodgin H. Cohen, Peggy Noonan, Nate Silver, Ian Bremmer, Anshu Jain, Richard Davis, Michael Corbat, William Demchak, Kelly King, Barney Frank and others.

Leadership

James D. Aramanda is the President and Chief Executive Officer of the Clearing House Association and Payments Company. [1]

Membership

Members of The Clearing House include JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Bank of New York Mellon Corp., Deutsche Bank AG, UBS AG, U.S. Bancorp and Wells Fargo & Co. [2] 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. [3] [4] It has offices in New York, North Carolina and Washington, D.C. [4]

U.S. Bancorp is an American bank holding company based in Minneapolis, Minnesota, and incorporated in Delaware. It is the parent company of US Bank National Association, known as US Bank, which is ranked 7th on the list of largest banks in the United States. The company provides banking, investment, mortgage, trust, and payment services products to individuals, businesses, governmental entities, and other financial institutions. It has 3,106 branches and 4,842 ATMs, primarily in the Midwestern United States, and has approximately 72,400 employees. The company also owns Elavon, a processor of credit card transactions.

Bank of America American multinational banking and financial services corporation

The Bank of America Corporation is an American multinational investment bank and financial services company based in Charlotte, North Carolina with central hubs in New York City, London, Hong Kong, Minneapolis, and Toronto. Bank of America was formed through NationsBank's acquisition of BankAmerica in 1998. It is the second largest banking institution in the United States, after JP Morgan Chase. As a part of the Big Four, it services approximately 10.73% of all American bank deposits, in direct competition with Citigroup, Wells Fargo, and JPMorgan Chase. Its primary financial services revolve around commercial banking, wealth management, and investment banking.

Bank of the West diversified financial services holding company

Bank of the West is a regional financial services company, headquartered in San Francisco, California. It is a subsidiary of BNP Paribas. It has more than 600 branches and offices in the Midwest and Western United States.

Barclays British multinational banking and financial services company

Barclays plc is a British multinational investment bank and financial services company, headquartered in London. Apart from investment banking, Barclays is organised into four core businesses: personal banking, corporate banking, wealth management, and investment management.

Lawsuits

In September 2009, the Clearing House joined a lawsuit in support of the Federal Reserve after a federal court in New York ruled against the Fed. [2] Filed by Bloomberg News under the Freedom of Information 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 of taxpayer funds during the bank bailout of the financial crisis of 2008. The Clearing House has filed an appeal before the United States Supreme Court on October 26, 2010. [5] The case was appealed [6] but ultimately rejected on March 21, 2011. The Federal Reserve was required to release the data within five days to Bloomberg L.P. [7] [8]

United States district court type of court of the United States federal court system

The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States district court. Each federal judicial district has at least one courthouse, and many districts have more than one. The formal name of a district court is "the United States District Court for" the name of the district—for example, the United States District Court for the Eastern District of Missouri.

Bloomberg News is an international news agency headquartered in New York, United States and a division of Bloomberg L.P. Content produced by Bloomberg News is disseminated through Bloomberg Terminals, Bloomberg Television, Bloomberg Radio, Bloomberg Businessweek, Bloomberg Markets, Bloomberg.com and Bloomberg's mobile platforms. Since 2015, John Micklethwait has served as editor-in-chief.

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:

The Clearing House was also sued by the State of New York in Andrew Cuomo v. Clearing House Association, LLC to determine whether the U.S. Treasury's Office of the Comptroller of the Currency (OCC) had the authority to preempt a state's right to enforce its own fair lending laws against national banks. [9] 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.

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 national banks and thrift institutions and the federally licensed branches and agencies of foreign banks in the United States. The Comptroller of the Currency is Joseph Otting.

History

The New York Clearing House, Oval Table. The New York Clearing House, Oval Table.jpg
The New York Clearing House, Oval Table.

The New York Clearing House Association, created in 1853, was the first U.S. bank clearing house. [10] Initially, it simplified the chaotic settlement process among the banks of New York City. 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 fluctuations and bolster the monetary system through recurring times of panic. Since the creation of the Federal Reserve System 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.” [11]

Founding, 1853

The New York Clearing House depicted in the 19th Century New York Clearing House.png
The New York Clearing House depicted in the 19th Century

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, 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. Today,[ when? ] the average is in excess of $20 billion. [11]

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. [11]

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. [11]

The certificates appeared in smaller denominations during the panic of 1873, 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.” [11]

In 1913, Congress passed the Federal Reserve Act, 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. [11]

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.[ citation needed ]

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.[ citation needed ]

On July 1, 2004, The New York Clearing House Association announced a name change to The Clearing House Association L. L. C.. [12]

See also

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References

  1. ↑ http://www.theclearinghouse.org/index.html?p=071215
  2. 1 2 Bob Ivry, "Fed Loses Bid for Review of Bailout Disclosure Ruling" Bloomberg News (August 23, 2010). Retrieved March 10, 2011
  3. ↑ Martin Campbell-Kelly, "Victorian Data Processing", Communications of the ACM, Vol. 53, No. 10, October 2010, pages 19–21
  4. 1 2 Company description The Clearing House. Retrieved August 29, 2011
  5. ↑ Bob Ivry and Greg Stohr, "Fed Won't Join Supreme Court Appeal on Loan Disclosures" Bloomberg News (October 26, 2010). Retrieved March 10, 2011
  6. ↑ Amicus curiae (PDF) The Clearing House (March 2, 2011). Retrieved March 10, 2011
  7. ↑ Stohr, Greg; Ivry, Bob (2011-03-21). "Fed Will Release Bank Loan Data as Top Court Rejects Appeal". Bloomberg.com. Retrieved 2016-09-20.
  8. ↑ "Federal Reserve Emergency Loans: Liquidity for Banks". Bloomberg. Retrieved 2016-09-20.
  9. ↑ Adam Levitin, "Cuomo v. The Clearing House Association: OCC Loses Even with Chevron Deference" Credit Slips financial blog (June 29, 2009). Retrieved March 2, 2011
  10. ↑ NEW YORK CLEARING HOUSE Historical Perspective
  11. 1 2 3 4 5 6 "New York Clearing House Association Records, 1868-1950". Columbia University Libraries. n.d. Retrieved 22 June 2016.
  12. ↑ The Law of Electronic Funds Transfers by Benjamin Geva
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