The History of The Gold Exchange in New York City

You pass from Broad street into the basement of a brown stone building just below the Stock Exchange, and find yourself in a long, dimly-lighted passage way, which leads into a small courtyard.  Before you is a steep stairway leading to a narrow and dirty entry.  At the end of this entry is a gloomy looking door.  Pass through it, and you are in the famous Gold Exchange.

This is a showy apartment in the style of an amphitheatre, with an ugly fountain in the centre of the floor.  An iron railing encloses the fountain.  Against the New street end is the platform occupied by the President and Secretary, and on the right of this is the telegraph office.  There are two galleries connected with the room, one for the use of visitors provided with tickets, and the other free to all comers.  There is an indicator on the outer wall of the building on New street, from which the price of gold is announced to the crowd without.  It is a common habit with sporting men of the lower class to frequent New street and bet on the indicator.

There are but few benches in the Gold Room.  The members of the Board are too nervous and excitable to sit still, and seats would soon be broken to pieces in their wild rushing up and down the floor.

The business of the day begins about ten o’clock.  The rap of the President’s gavel opens the session, and as there is but one thing dealt in—gold—the bids follow the sound of the mallet.  The noise and confusion are greater here than in the Stock Board or the Long Room, and it seems impossible to a stranger that the President should be able to follow the various transactions.  When the excitement is at its height, the scene resembles “pandemonium broken loose.”  The members rush wildly about, without any apparent aim.  They stamp, yell, shake their arms, heads, and bodies violently, and almost trample each other to death in their frenzied struggles.  Men who in private life excite the admiration of their friends by the repose and dignity of their manner, here join in the furious whirl, and seem more like maniacs than sensible human beings.  And yet every yell, every gesture, is fraught with the most momentous consequences.  These seeming maniacs have a method in their madness, and are changing at every breath the value of the currency upon which the whole business of the country rests.  When the fluctuations are very great, fortunes are made and lost here every hour.

Connected with the business of the Gold Room are the Gold Exchange Bank and the Clearing House.  The method of settlement with these institutions, which are indispensable where gold passes so rapidly from hand to hand in the Exchange, is as follows: “On or before half past twelve o’clock, a statement of all the purchases or sales made by each broker on the preceding day must be rendered to the bank.  If the gold bought be in excess of that sold, a check for the difference must accompany the statement.  If deposits in gold or currency are not kept in the bank, the coin must be delivered at every deficiency.  The Board adjourns at twelve, in order to enable tardy dealers to complete their accounts.  Provided all contracts are honored, the bank must settle by two P.M.  In case of default, the amount in abeyance is debited or credited to the broker who suffers by the failure.”

The Clearing House Association was created in 1853, and represents the sum of the financial business of the city.  “The Association is located in the third story of the building of the Bank of New York.  The centre of the room is occupied by a bank counter, extending on four sides, with a passage inside and out.  Fifty-nine desks are placed on the counter for the use of the fifty-nine banks represented in the Association.  Each desk bears the name of the bank to which it belongs.  Fitted up in each desk are fifty-nine pigeon holes for the checks of the various banks.  Two clerks represent each bank.  One remains at the desk and receives all the checks on his bank.  He signs the name of the bank to the sheet which each outside clerk holds in his hand.  These outside clerks go from desk to desk and leave the checks received the day before, with the banks on which they are drawn.  Banks do not begin public business till ten; but clerks have to be on hand at eight, when all checks are assorted and arranged for delivery at the Clearing House.

“At ten minutes before ten the bank messengers begin to assemble and take their places.  As they enter they leave with the messenger a slip containing an exact account of the bank they represent.  These statements are put on a sheet prepared for that purpose, and must conform precisely to the checks received inside, before the Clearing House closes its duties.  If there is any error or discrepancy, the bank is immediately notified by telegraph, and the clerks kept until the matter is satisfactorily adjusted.  At ten, promptly, business begins.  Clerks come rushing in with small trunks, tin boxes, or with bundles in their arms, and take their seats at the desks.  On the side of the room entered only from the manager’s office is a desk, not unlike a pulpit.  Precisely at ten the bell rings, the manager steps into his box, brings down his gavel, and the work of the day begins.  Quiet prevails.  No loud talking is allowed, and no confusion.  A bank late is fined two dollars; a party violating the rules, or guilty of insubordination, is fined two dollars and reported to the hank.  On repetition, he is expelled the Clearing House.  The daily transactions of the Clearing House varies from ninety-eight to one hundred millions.  The system is so nicely balanced that three millions daily settle the difference.  Each bank indebted to the Clearing House must send in its check before half after one.  Creditors get the Clearing House check at the same hour.  Daily business is squared and all accounts closed at half after three.  Every bank in the city is connected with the Clearing House by telegraph.  The morning work of clearing one hundred millions, occupies ten minutes.  Long before the clerks can reach the bank, its officers are acquainted with the exact state of their account, and know what loans to grant or refuse.  Through the Clearing House each bank is connected with every other in the city.  If a doubtful check is presented, if paper to be negotiated is not exactly clear, while the party offering the paper or check is entertained by some member of the bank, the telegraph is making minute inquiries about his financial standing.  Before the conference closes, the bank knows the exact facts of the case.”

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