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. § 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 dollars, must be made by persons in and near Chicago to those in and near New York, while, at the same time, equally large sums are due from New York to Chicago. The wasteful process of shipping these sums back and forth is avoided by the cancellation of indebtedness between the two localities. It has been the practice for each small bank to keep a part of its legal reserves in correspondent banks in one or more of the larger cities on which it draws bills of exchange for its customers and to which in turn it remits for collection drafts and checks which it has received. From time to time, as balances of accounts increase on the one side or the other, shipments of actual money become necessary, but these are only a small fraction of the total amount of the bills of exchange. Similarly, the settlement of accounts between any two localities can be made by the shipment of comparatively small sums of money. Under the Federal Reserve Act the reserve banks are in various ways assuming the functions of the correspondent banks.