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.
Calendar
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