To my understanding, the common method is that bank A and Bank B is both customers at the clearinghouse, in your case the US Federal Reserve. Bank A has an acco

To my understanding, the common method is that bank A and Bank B is both customers at the clearinghouse, in your case the US Federal Reserve. Bank A has an account, and Bank B has an account, generally a deposit serving as security. A "bank day" is basically the sum at the end of the day that bank A own to bank B. No physical money get transferred unless the US Federal Reserve requires it, which if both banks has fairly similar outgoing debt to each other the accounts won't change by much. the US Federal Reserve don't see the "$10,000 is for John Doe, $10,000 for Jane Smith", only the sum of all transaction going from A to B or B to A. Bank A tells bank B that "I told the US Federal Reserve to update your account by +$1,000,000 and reduce my own account by same amount, and you can verify this by talking to the US Federal Reserve and checking your account. The items that those +$1,000,000 represent are listed here. John Doe get $10,000, Alice get $5,000, ...". This occur through the SWIFT protocol. Bank B then do the same by first telling US Federal Reserve and then giving bank A the list of the individual items. The US Federal Reserve don't really transfers money. They simple managed the ledgers for banks relation with other banks. What occurs is simply a ledger being updated about how much bank A is in dept to bank B, and wise verse. The federal bank will step in if a bank defaults, or I guess if the differences between A and B becomes too great to manage.