The Journal of Economic History

Papers Presented at the Forty-fourth Annual Meeting of the Economic History Association

Clearinghouses and the Origin of Central Banking in the United States

Gary Gortona1

a1 The author is Assistant Professor of Finance, The Wharton School, University of Pennsylvania, Philadelphia, Pennsylvania 19104.


The pre-1914 U.S. banking industry is not easily characterized as a market operating through a price system. The endogenous development of the clearinghouse as the industry's organizing institution can be explained by inherent characteristics of demand deposits. During banking panics the clearinghouse united banks into an organization resembling a single firm which produced deposit insurance.