Volume 2 - ElectricCanadian.com

HISTORY OF THE BANKcorrespondents, and not to treat them as cash, as UnitedStates correspondents were refusing to accept on deposit itemspayable at outside points. The reason for this was that suchitems were settled for by drafts drawn on the principal clearinghousecentres, and at these centres clearing-house balanceswere being settled only by means of clearing-house certificates,which were certificates of indebtedness usually bearing interestand secured by the deposit of short-dated commercial paper.No currency or real money was available for remittances,except at a very heavy premium. Many of the clearinghouseassociations at this period not only issued certificatesfor the purpose of settling clearing-house balances, but alsofor use as ordinary currency.The latter were based on similarsecurity, but were issued in sums as low as five and ten dollarseach to take the place of bank-notes. The situation in theAmerican metropolis was steadily growing worse. On November13, New York funds were reported at a considerablediscount, and by November 19 they were unsaleable inMontreal and Toronto at a nominal discount of one per cent.Panic had developed in the United States. In the latter partof October a number of large banking institutions in NewYork City closed their doors; and banks throughout thecountry, pressed by frightened depositors, took alarm, andbegan to withdraw their funds from the New York banks asquickly as possible. The reserves of the clearing-house banksfell rapidly, and in a few days a general suspension of cashpayments was inaugurated and continued for two months.It was not until February, 1908, that the head office of TheCanadian Bank of Commerce was able to advise its branchesthat conditions in the United States had again become normal,and to remove the restrictions imposed during the crisis.The steps taken by The Canadian Bank of Commerce toregulate new credits and to persuade its customers to reducetheir liabilities have already been described; and these weretypical of the course followed by all the leading Canadianinstitutions. Consequently, when the crash came, financial