Proper notice of the meeting should be given to the shareholders. At this meeting the shareholders may appear in person or by attorney. In executing and forwarding the papers the following intsructions should be strictly observed:

"The certificate of the president or cashier certifying that shareholders owning at least two-thirds of the stock having consented, in writing, to the amendment, should be executed in duplicate and one copy transmitted to this office, together with the letter applying for approval of the Comptroller, at least two months prior to the expiration of the corporate existence of the bank, in order that the Comptroller may have sufficient time to cause the special examination to be made, as required by section 3 of said act.

"If any shares of the bank stand in the name of administrators, executors, trustees, or guardians, and it becomes necessary to have the votes of these shares to make up the majority required to authorize the amendment, duly certified copies of the legal appointment of such administrators, executors, trustees, or guardians should be sent to the Comptroller. In the case of stock held by a corporation, a certified copy of a resolution of the board of directors authorizing the president or other officer to consent to the amendment, is required.

When stock voting for an amendment stands in the name of an assignee, there must be evidence showing that the shares of stock have been regularly transferred to him, as such assignee, on the books of the bank. When the amendment is signed by an attorney acting for shareholders, properly executed powers of attorney must be furnished."

Upon the receipt of the papers in due form, the Comptroller will order the special examination required by section 3, which must be paid for by the bank, and if the report of the examiner is favorable, the Comptroller will, at the date of expiration of charter, issue his certificate of extension.

With but few exceptions there is no provision made by the laws of the various States for extending the charters of banks. When the life of the charter expires, if the bank desires to continue in business it must proceed to reincorporate and comply with the law in force at the time of its reincorporation.

CHAPTER XLVI.

CLEARING-HOUSE.

§ 342. History of the clearing-house.

The origin or history of the clearing-house as given by Bouvier is presented as follows:

"The origin of the system is said to have been in Edinburgh; at least the bankers of that city so claim, but the earliest record of one (and that is not clear as to date) is that of London, founded in 1775, or possibly earlier. It was started in the alehouse of those times, the general resort of proprietors of new enterprises. The system, however, increased in usefulness so much as to require rooms, which were procured in Lombard street, and a system was rapidly developed of exchanging checks and other securities to reduce the amount of actual money required for settlements. In this country such associations were established in New York, in 1853, Boston, in 1856, Philadelphia, Baltimore, and Cleveland, in 1858, Worcester, in 1861, Chicago, in 1865, and since that date the number increased rapidly to thirty-one in 1884 (Bolles, Proct. Bkg.), and the system is now extended to most of the cities in which there are several banks. They also exist in Australia, France, Germany, Switzerland, Italy, and other continental countries of Europe. Most of these associations are unincorporated, but in Minnesota there is an act (March 4, 1893) for their incorporation. The Clearing-house Association of New York consists of all the incorporated banks - private bankers not being admitted as in London. Two clerks from each bank attend at the clearing-house every morning, where one takes a position inside of a counter at a desk bearing the number of his bank, the other standing outside the counter and holding in his hand parcels containing the checks on each of the other banks received the previous day. At the sound of a bell, the outside men begin to move, and at each desk they deposit the proper parcel, with an account of its contents -until, having walked around, they find themselves at their own desk again. At the end of this process the representative of each bank has

handed to the representatives of every other bank, the demands against them, and received from each of the other banks their demands on his bank. A comparison of the amounts tells him at once whether he is to pay into or receive from the clearinghouse a balance in money. Balances are settled daily. In London the practice of presenting checks at the clearing-house has been held a good presentment to the banker at law. It is not usual to examine the checks until they are taken to the bank, and if any are then found not good they are returned to the bank which presented them, which settles for such returned checks. In this country when a check is returned not good through the clearing house, it is usually again presented at the bank."

§ 343. Character and object.

The character and object of a clearing-house, as formed by the co-operation of a number of bankers in the city of Philadelphia some years ago, is very correctly defined by the court in the case of Philler v. Patterson, 47 Am. St. Rep. 896.

The court after examining the constitution or articles of association adopted by the banks, then says:

"In substance these articles amount to an agreement with each other by thirty-eight national banks in the city of Philadelphia to facilitate and simplify the settlement of daily balances between them for their mutual advantage. This agreement substitutes a settlement made at a fixed time and place each day, by representatives of all the members of the association, in the place of a separate settlement by each bank with every other made over the counter. No other object is contemplated or provided for. The association does not provide for any united action for any business purpose. It does not contemplate the employment of capital or credit in any enterprise. It proposes and provides for co-operation to expedite and simplify the transaction by each member of the association of its own proper business in one particular, viz., the settlement of daily balances with the other national banks doing business in the city. Incidentally, co-operation in this particular would tend to bring the banks belonging to the association into closer relations, enable them to become more familiar with the volume of business and the actual condition

of each other, and open the way to make them mutually helpful in times of financial stringency, but these results are incidental only. The Clearing-house Association is nothing more nor less than an agreement among thirty-eight national banks to make their daily settlements at a fixed time and place each day."

The mode of putting the agreement or articles of association of the clearing-house into operation, is then given by the court in the following language:

"To carry this agreement into operation it became necessary to determine the place and hour at which the settlement should be made. A suitable room was secured, fitted up with desks and other necessary appliances at the expense of the associated banks, and a manager chosen to preside over it and direct the action of the clerks and runners when in session. This room is the clearing place, or in the language of the constitution of the association, the clearing-house. It is the place where the representatives of the several banks meet and where all balances are struck and settled daily between the banks composing the association.

"At the close of each meeting the amount due to and from each bank is definitely ascertained. The debtor banks then pay over to the manager the gross balance due from them to settle their accounts with all the members of the association, and he makes distribution of the sum so received among the creditor banks entitled to receive them. The clearing-house is, therefore, not a business organization, a corporation, a partnership, or an artificial person of any sort, but a place in which the members of the association settle with each other daily. We come now to consider the committee and the position in the general scheme occupied by it. Among the economies in time and labor contemplated by the banks was a settlement of daily balances without the necessity for handling and counting the cash in every case. To provide for this the banks agreed that they would deposit in the hands of certain persons, to be selected by them and to be called the clearing-house committee, a sum of money or its equivalent in good securities, at a fixed ratio upon their capital stock, to be used for payment of balances against them. For these sums the committee was to issue receipts or certificates in convenient sums, and these

receipts or certificates were to be used in lieu of the cash they represented, which remained in the hands of the committee pledged for the payment, when payment became necessary, of the certificates. The committee held the funds and securities deposited with them in trust for the special purpose of securing the payment as far as they would reach of the balances due from the bank making the deposit.

"On September 24, 1873, the associated banks entered into another agreement with each other by which, for the purpose of enabling the banks, members of the Philadelphia Clearing-house Association, to afford proper assistance to the mercantile and manufacturing community and also to facilitate the interbank settlements resulting from the daily exchanges,' they authorized the committee to receive from any member of the association additional deposits of bills receivable and other securities and issue certificates therefor in such amount and to such percentage thereof as may in their judgment be advisable.' The additional certificates, if issued, they agreed to accept in payment of daily balances at the clearing-house on the condition that the securities deposited therefor should be held by the committee in trust as a special deposit pledged for the redemption of the certificates issued thereupon.' The committee were made, both by the original articles of association and by the aditional contract of 1873, trustees or agents for all the members of the association, with authority to accept deposits in money or securities and to issue their own receipts therefor, the money or securities remaining in their hands in pledge for the redemption of the receipts or certificates so issued by them. When a bank to which certificates had been issued under the original plan or the contract of 1873 failed to redeem them when their redemption became necessary, it was the duty of the committee to collect the securities in their hands and apply the proceeds to the payment of the holders of the certificates. The deposits were made and the certificates issued under an unconditional pledge of the securities to the committee for the payment of the certificates, and their title could only be divested by the payment of the sums for which the securities were pledged. The entire plan on which the settlements are made is, therefore, a device adopted by the banks to facilitate their legitimate business as banks, and involves no element