New York Gold Exchange Bank

The New York Gold Exchange Bank was a New York City-based bank, organised in 1866 by Elias Cornelius Benedict and Henry Marvin Benedict, that existed principally to clear gold contracts that were transacted in the New York Gold Exchange, settling the accounts between buyers and sellers. The bank was directly caught up in the the Black Friday gold panic of September 1869 as it was unable to cover debts from reserves as the result of an attempt by Jay Gould and his partners, the Gold Ring conspirators, to corner the American gold market.

By 1878, under the leadership of Richard L. Edwards, the functions of the bank were transferred by the New York Gold Exchange to the Bank of the State of New York.

as Detailed by H. M. Benedict

 * "H. M. Benedict, examined by Mr. Parsons Q. Describe to the committee what was the nature and character of that bank, as a clearing house in gold transactions? A. The business was conducted on a clearing principle applied to the two classes of currency, gold and paper; the object of the clearing was to facilitate settlements between buyer and seller, borrower and lender; it was found to be a great facility, great benefit in the settlement of these exchanges, and the business was done on statements of buyers supplied to the bank, according to the rules and regulations of the bank; it would be a long story to go through the whole details. Q. Simply describe the actual process by which you cleared gold transactions? A. The actual process was to bring the transactions of buyers in buying and selling, borrowing and lending upon the statement; each buyer supplied the bank with a statement of his transactions; there were some three or four hundred dealers, embracing all the leading bankers and borrowers in the city, and instead of stating their transactions by each case for each item, pro and con, as the business was done they would bring the items upon the balance sheet, and each dealer would designate on his statement the transactions &mdash; the purchases on the one side as well as the other, or the gold borrowed on the one side and loaned on the other, and the footing of that statement would represent that dealers' transactions for the day, and the balance was settled by gold or currency, or both, as the statement required. Q. When all the transactions for the day were settled, what was the effect, so far as the bank was concerned?  A. The effect was the same as any other clearing establishments; we have paid out all we have received in; it acted as a balance sheet; the trial balance of the entire business of that sheet for that day, and the business was conducted regularly for three years, without a mistake perhaps of fifty cents in the whole time, so that these transactions were closed definitely, and trial balance obtained within an hour and a half of time, when the clearing commenced."