opened in New York in 1853, located on the fourth floor of the Bank of New York on the corner of Wall Street and William Street. One of the difficulties of the New York clearing operation was that there were over 50 banks in the city and it was realized that the exchanging of checks—as described by Babbage— would create too much confusion and foot traffic. Some nameless genius came up with the brilliant solution depicted in the image on the preceding page of this column. The New York Clearing House constructed a very large oval table, approximately 70 feet in length, with enough working space for each bank. According to a contemporary account, 2 at 10 o’clock precisely, two clerks from each bank took their places at the table—one seated inside the table and the other standing outside, facing his colleague. At the manager’s signal, the clerks outside the table would take one pace forward and perform the day’s transactions with the bank they now faced. The process was then repeated, the circle of clerks advancing one pace at a time to the next station “resembling in its movement a military company in lockstep.” After about six minutes the clerks were back in their original positions, the distribution process completed. After that, it was just a matter of balancing the books. If there was a failure to get a zero balance, then there was a system of checks and double-entry accounting so that the error could be detected. Another Yankee innovation, which reputedly cut down on the number of errors, was a system of fines. If an error was found quickly there was no fine, but if it was not detected within an hour a fine of two or three dollars was imposed on the offender, which doubled and quadrupled, the longer it took to find.

The New York Clearing House flourished, and other American financial centers established their own clearing houses—Boston in 1856, Philadelphia in 1858, followed by Chicago and St. Louis some years later.

 

Persistence of System You might wonder what happens when you write a check today. In terms of the system, the process is not very different from that of the 19th century. Of course, the technology employed has changed

the longevity
of information
systems is one of
the great lessons
of computer history.

beyond recognition. In the 1960s the great innovation was check-reading machines—for which MICR and OCR fonts were designed, and these still appear on the face of a check. Once data had been extracted from the check, it was transferred to magnetic tape for computer processing. It was said at the time that without banking automation it would not have been possible for millions of ordinary Americans to have checking accounts, or to write checks for very small sums of money. By the 1980s, electronic data transfer eliminated much of the physical handling of data. But again, the underlying information system was little altered.

The longevity of information systems is one of the great lessons of computer history. Although new layers of technology are constantly applied to information systems, making transactions faster and cheaper, the underlying systems are remarkably stable and persistent, although of course they do gently evolve over time. We may glory in today’s information technology, but one day it will be swept aside—and when it is, and we have logged off for the last time, these venerable systems will survive for another generation of technology. Those Victorian office makers perhaps built better than they knew, and we should salute them.

 

References

1. babbage, c. The Economy of Machinery and Manufactures. charles Knight, London, 1832.

2. gibbons, J.s. The Banks of New York, their Dealers, the Clearing House, and the Panic of 1857. appleton, new york, 1864.

3. Matthews, P.w. The Banker’s Clearing House: what it Is and what it Does. Pitman, London, 1921.

 

Martin Campbell-Kelly ( M.campbell-Kelly@warwick. ac.uk) is a professor in the department of computer science at the university of warwick, where he specializes in the history of computing.

copyright held by author.

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