New York Clearing House Association: Overview

Between the creation of nationally chartered banks in 1863 and the launch of the Federal Reserve System in 1914, an organization of most New York City banks—originally formed to simplify settling clearing balances—joined together during banking panics to reallocate liquidity and restore market confidence. In the absence of a central bank, this organization, the New York Clearing House Association (NYCH), issued clearinghouse loan certificates (CLCs) that association members could use as temporary cash substitutes for settling clearing balances between banks. CLCs allowed borrowing banks to maintain their cash reserves without costly asset liquidations. The NYCH used CLCs in six crises across this period: 1873, 1884, 1890, 1893, 1907, and 1914. Other major cities had comparable organizations that often took similar measures during crises. This document serves as an overview to the NYCH structure, while the six cases deal with the individual crises and responses.