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which it fosters. The demands made upon banks for both cash and credit
vary with the seasons. In the fall and spring they are much greater
than in the winter and summer. They also vary regularly through
periods of years, increasing during the up-grade of a credit cycle and
decreasing for a longer or shorter period after a crisis. Irregular
and unexpected events also cause variations. On account of the
rigidity of this reserve system and the lack of elasticity in our
currency, the means available to banks for meeting increased demands,
especially those of an irregular and unexpected character, are
inadequate, and their employment is often dangerous. These means are:
keeping in the vaults in slack times a large amount of unused cash, a
practice too expensive to be employed; keeping surplus balances with
correspondents at two or three per cent interest, not a sufficiently
remunerative practice to be employed on a sufficiently extensive
scale; rediscount with correspondents of some of their customers'
paper, or loans from them on the security of their own signatures or
on such security supplemented by collateral; and sale of bonds at such
prices as they will bring.

None of these expedients is certain at all times and under all
conditions, and some of them are precarious at all times. Surplus
balances with correspondents are most reliable, but they occasionally
fail on account of the inability of correspondents to realize upon
their call loans. When calls for the payment of balances are large and
general, it is impossible for brokers whose loans are called by one
bank to transfer them to another. The collateral deposited as security
must, therefore, be offered for sale on the stock exchange, and the
very stringency which resulted in their being so offered renders their
sale, even at slaughter prices, difficult and sometimes impossible.
The result at the best is a heavy fall in the prices of stock-market
securities, and at the worst a stock-market panic and a suspension of
payments by the banks.

Rediscounts and loans from correspondent banks cannot be depended on.
Correspondents are under no obligation to make them. They will usually
do so as a favor, if their condition warrants, otherwise not. Sales of
bonds on the stock exchange are difficult and sometimes impossible in
times of emergency, and are usually attended with loss.

On account of this uncertainty and the danger attending it, when new
and unusual conditio