Bank Collections -- The Direct Routing Practice, 39 Yale Law Journal 468 (1930)
The establishment of the Federal Reserve system gave promise
of sweeping aside a half century of unsound bank collection
practices. The most spectacular of these, the one which
largely preoccupied the economists interested in banking, was
that of circuitous routing.l Under this practice items on relatively
close points were often shunted back and forth across
the country for days and even weeks before finally being presented
for payment, and then, in event of dishonor, were sent
back through the same devious route to reach the depositor
again. The method was slow, costly, and fraught with risk.
The additional handling increased the chance of error, the delay
increased the risk of non-payment, and, even when payment was
made, the multiplication of banks increased the risk of loss
through bank failure.
Date of Authorship for this Version
direct routing, Federal Reserve
Turner, Roscoe B., "Bank Collections -- The Direct Routing Practice" (1930). Faculty Scholarship Series. Paper 4464.