s.
The great discretionary power as to reserve requirements thus lodged
in the hands of the Board makes possible at times of emergency the
use of the reserves both of the reserve banks and of the member banks,
down to the last dollar, if need be, without violation of law. This
gives practically unlimited opportunity to expand credit both by
the issue of bank notes and by discount and deposit in periods of
financial crises.

Sec. 7. #Reserves in member banks.# A fundamental change is made in the
rules as to the reserves against deposits that must be maintained by
the member banks. A new distinction is made between time and demand
deposits. Time deposits are defined as those payable after thirty days
or subject to not less than thirty days' notice; and demand deposits
as those payable within thirty days. In every case the reserve
requirement against time deposits is only 5 per cent. This gives
encouragement to banks to maintain savings departments.

The requirements as to reserves against demand deposits are not
uniform, being the lowest for banks in smaller cities (the great
majority), larger for banks in the reserve cities, and largest for
banks in the three central reserve cities (New York, Chicago, St.
Louis). The act substitutes the new Federal reserve banks for the
banks in reserve and central reserve cities as the depositories of
funds that may[9] be counted as a part of the reserves of member
banks. The new rule requires that one-third must be in the bank's own
possession, a fraction slightly over a third must be in the Federal
reserve bank, and the remainder may be kept in either place. This may
be tabulated as follows:

_Not in In reserve In central
reserve cities cities reserve cities_

Total reserves, per cent 12 15 18
Must be in its own vaults 4/12 5/15 6/18
May be either place 3/12 4/15 5/18
Must be in a Federal reserve bank 5/12 6/15 7/18

These requirements as to total reserves are, as compared with
requirements of national banks under the old law, a reduction
respectively of 20 per cent, 40 per cent, and 28 per cent. The total
decrease in the amount of reserves required for all three classes of
national banks was about $400,000,000 on the amount of deposits held
in September, 1914.

Sec. 8. #Rediscounts by Federal reserve banks.# More important than
any othe