e of banking reserves#. Banks would have nothing to gain by
receiving deposits or by issuing notes if they were obliged to keep
in the vaults actual money to the amount of their deposits and
outstanding notes (unless they were paid by depositors for taking care
of deposits). Banks have found it necessary in practice to keep on
hand money amounting to only a fraction of all their outstanding
obligations in order to be able to pay promptly all due demands,
excepting in periods of general financial distress. The sum thus kept
on hand is called the _reserve_ or the _reserves_ of the bank, and
this is frequently expressed as a percentage of reserves against
deposits or against note issues, respectively. Frequently, as in the
United States, a minimum percentage of reserves is fixed by law.[7]

A bank's reserves consist, first, of the lawful money which it
actually holds in its vaults at any moment and secondly, of certain
other credit items in other banks or with the government, of such
a nature that a bank is permitted to count them as tho immediately
available.

The explanation of the adequacy of a mere fractional reserve is
found in the nature of the individual monetary demand[8] and in the
effective way in which a checking account serves as a substitute for
actual money.[9] Every customer, if he would avoid overdrawing his
account, must at most times keep a goodly balance to his credit that
he does not immediately need. Many individuals and corporations must
at times keep very large balances. The times of maximum monetary need
of the customers of a bank never exactly coincide and many payments
are made among the customers of a single bank, requiring only
bookkeeping transfers. A fractional reserve is therefore ordinarily
fully adequate, altho with any less than a 100 per cent reserve
any bank would be insolvent if all of its demand obligations were
presented at the same instant. Such a contingency is made impossible
by business custom and public opinion especially among the larger
customers of banks, but the panic of small depositors often brings
about dangerous conditions.

Sec. 8. #Bills of exchange, domestic.# Foreign and domestic exchange
is the sale of orders for the payment of specified sums of money
at distant points. But for this, payments at distant points would
ordinarily have to be made by sending the money in some way. It must
often occur, for example, that hundreds of payments, aggregating
millions of dol