APPENDIX 
635 
serve Bank of New York, before the Agricultural Inquiry Commission 
in Washington in 1921 (p. 650). 
That the proportional deflation of stock market loans was not 
only earlier but also more severe than that attending other uses of 
bank credit is also revealed clearly by the relevant statistics. Stock 
market loans declined from a peak of $1,518,266,000 to a “bottom” 
of $680,448,000 on September 7, 1921—a total decline of $837,818,000, 
or 55%. But the decline of all Reserve member loans and investments 
from their peak of $17,283,996,000 to their “bottom” of $14,726,585,000 
amounted to $2,557,411,000 or less than 15%. 
CHAPTER XII 
Comparison and Security Clearance 
(XIIa) In his thesis “The Evolution of Financial Clearance in 
New York,” Mr. Herman H. Cohen did a valuable piece of research 
into the origins of security clearance and settlement methods in New 
York, whose more important facts are briefly summarized here. 
Almost since 1853, when the New York Bank Clearing House was 
sstablished, a simple system for clearing security contracts made on 
the New York Stock Exchange found its hearty advocates, especially 
after the panic of 1857. The success of the contemporary experiment 
in security clearance by the Frankfort Handelskammer was observed 
with interest. For the time being, however, nothing constructive was 
accomplished. 
After the Civil War, activity in the stock market again created 
interest in the subject of security clearance, particularly since the 
clearing system on the Gold Exchange had recently achieved an un- 
doubted success. Accordingly in 1868 a company with an authorized 
capital of $1,000,000 was organized by Stock Exchange members to 
perform a security clearance business on a fee basis. But the use of 
this organization was not made compulsory, either by the Stock Ex- 
change or the Open Board of Brokers, and although moderately effi- 
cient, it soon failed to develop sufficient clientele to survive. In 1873 
a second attempt was made, based largely upon the European term 
settlement systems. Although the New Stock Exchange sufficiently 
amended its constitution to permit of dealings “for the account,” 
members of the Exchange almost invariably preferred to trade “regular 
way” for settlement the next day. As a result, in a very short time 
this second attempt failed. 
After the failure of 1873, half-hearted and equally futile attempts 
‘0 inaucurate security clearance occurred in 1877, 1879, and 1880,