avorable, it
is received from him.

The checks received through the clearing house or presented by
messengers from other banks and paid, are debited to the accounts of
the persons who drew them and returned to such persons as vouchers,
the net result of the entire transaction being the same as if all the
parties involved had been customers of a single bank, with the
exception that some means of paying balances had to be found. Since
balances are sometimes paid by checks on some central institution in
which credit balances may be obtained by rediscounts of commercial
paper, this necessity can be met without the use of any form of
currency other than that furnished by banks themselves.

Checks drawn upon out-of-town banks are, in this country, collected
through so-called correspondents. Each bank enters into an
arrangement with a few other banks, distributed throughout the country
and conveniently located for the purpose, by which the correspondent
bank agrees to conduct with it a checking account on which it will
credit at par or at a stipulated discount the checks sent it for
collection and debit checks drawn against such an account. A
comparatively small number of such correspondents suffices, since
certain banks in the larger cities, by making a business of such
collections, conduct checking accounts with a large number of banks,
and can thus make collections by mere transfers of credits on their
own books or by the use of the local clearing house. The so-called
reserve cities in this country constitute clearing centers for the
territories contiguous to them, and New York, Chicago, and St. Louis,
for the entire country.

Checks received from correspondents and drawn against themselves are
debited to the accounts of the customers who drew them and returned as
vouchers in the same manner as checks received through the clearing
house or paid over their own counters.

Through this interchange of checks between banks and the conduct of
checking accounts with each other, intermunicipal and international
exchanges are conducted through the bookkeeping processes of
commercial banks with the same ease and economy as are exchanges
between people living in the same town.

_6. Domestic Exchange_

The accounts of a bank with its correspondents are a record of the
transactions of its customers with the outside world, the checks they
receive as a result of sales to outsiders of merchandise, real estate
or other property,