The indirect approach to the relation between New York clearings and New York deposits, _via_ the study of outside clearings in 1913 and 1914, taken in conjunction with the figures for check deposits in 1909, would seem to make it quite clear that New York clearings do not exceed New York deposits, or, indeed, constitute a substantially higher percentage of them than is the case with country clearings and deposits.[403] Logically, assuming the correctness of the estimate for checks deposited, the case is complete: we have a simple problem in arithmetic: given country clearings for 1909, 62 billions; given the ratio of country clearings to country deposits (and a minimum for this ratio is clearly given, in the 40% which country clearings are of "total transactions"), we can fix a maximum for country deposits, which is 155 billions. Then, given our estimate of 353 billions for total check deposits, we subtract the maximum possible for country deposits from it, and get a minimum possible for New York City of 198 billions of check deposits. Comparing this with the known clearings of 104 billions in New York, we find that New York clearings constitute, as a maximum possible, 52.5% of New York check deposits. If the reasons given for holding check deposits in the country to be less than total transactions are accepted, the ratio of clearings to deposits in New York City is lower.
Indirect calculations, however, even when logically complete, ought to be checked up by other methods, when possible. We have some further data, drawn from an earlier period, 1890-91-92, which suggest the same conclusion.
The reason commonly offered for holding that New York clearings exaggerate local New York transactions, as compared with country clearings and country transactions, is that New York is the clearing house for the country. Country banks send their idle cash there; country banks pay other banks by drafts on their New York balances; country banks send out of town checks to New York for collection; business men in St. Louis pay business men in Chicago with New York exchange, etc. These items are supposed greatly to swell New York clearings.
Now several of these reasons are not at all valid. Cash shipped back and forth between New York and the interior does not get into clearings. Secondly, New York, because of the charges made for collecting out of town checks, has tended to lose much of the collection business. Chicago probably does a great deal more of it than New York does.[404] However, even if checks on out of town banks were sent largely to New York for collection, they would not get into the clearings. New York banks send checks on country banks directly to country correspondents. Checks on out of town banks sent in for collection do swell clearings in Boston and Kansas City, where arrangements have been made, to the advantage of all concerned, to have the clearing houses handle this business. But New York has not made provision for it.[405] The only checks that get into New York clearings will be checks drawn on New York banks.[406]