To read the full version of this content please select one of the options below:

Political economic limits to the fed’s goal of a common national bank money: The par clearing controversy revisited

Research in Economic History

ISBN: 978-1-78350-487-9, eISBN: 978-1-78350-488-6

ISSN: 0363-3268

Publication date: 18 March 2014


The increased use of checks in nonlocal payments at the end of the nineteenth century presented problems for their clearing and collection. Checks were required to be paid in full (at par) only when presented directly to the drawn-upon bank at its counter. Consequently, many, primarily rural or small-town, banks began to charge remittance fees on checks not presented for collection in person. Such fees and the alleged circuitous routing of checks in the process of collection to avoid them were widely criticized defects of the pre-Federal Reserve payments system. As the new Federal Reserve established its own system for check clearing and collection, it also took as an implicit mandate the promotion of universal par clearing and collection. The result was a bitter struggle with non-par banks, the numbers of which initially shrunk dramatically but then rebounded. A 1923 Supreme Court decision ended the Fed’s active (or coercive) pursuit of universal par clearing, and non-par banking persisted thereafter for decades. Not until the Monetary Control Act of 1980 was universal par clearing and true monetary union, in which standard means of payment are accepted at par everywhere, achieved.




An earlier version of this paper was presented at the Instead of the Fed conference held at George Mason University in November, 2013. We would like to thank Chris Hanes , James McAndrews, and Hugh Rockoff for their useful comments and assume responsibility for any remaining errors. James also thanks the Bankard Fund for Political Economy for financial assistance.


James, J.A. and Weiman, D.F. (2014), "Political economic limits to the fed’s goal of a common national bank money: The par clearing controversy revisited", Research in Economic History (Research in Economic History, Vol. 30), Emerald Group Publishing Limited, Bingley, pp. 91-134.



Emerald Group Publishing Limited

Copyright © 2014 Emerald Group Publishing Limited