That is the situation. The twelve regional banks, which were supposed to make money serve all parts of the country equally, have apparently been “overcome in an administrative way” to such an extent that the New York Federal Reserve Bank is to all intents and purposes the Central Bank of the United States, and serves the speculative part of the country with millions, while the productive part of the country is permitted to wilt with paltry thousands. When it can occur that four New York banks can borrow from the New York Federal Reserve Bank as much money as the banks of 21 states were able to borrow from the five Federal Reserve Banks of St. Louis, Kansas City, Minneapolis, Dallas and Richmond—there would seem to be need of explanation somewhere. Where did this money loaned in New York come from? It came from those parts of the country where money was scarcest. In May, 1920, the word went out over telephones—“The tie-up will come on the 15th.” And it came. Credit was stopped. Payment was pressed. A stream of money, literally squeezed out of the producing sections of the country, began to roll toward New York. Otherwise those giant loans just recorded would have been impossible. It was pressure, Federal Reserve pressure, politely known as deflation, and that is the way it worked. The banks of the West were squeezed dry that the banks of New York might overflow. “_The money was withdrawn from legitimate business in various parts of the country to be loaned at fancy rates in Wall Street_,” says the official referred to above. The speculative banks, it has been discovered, were able to borrow money at six per cent, which money they loaned at as high as 20, 25 and 30 per cent. Federal Reserve deflation created a scarcity which speculative banks utilized. The Federal Reserve policy took the money out; New York banks borrowed the money thus taken out, and loaned it at tremendous rates—rates which people paid to stave off the ruin caused by the moneyless condition which the ill-measured deflation process brought on. And all this time the Federal Reserve System was in the best financial condition of its whole career. In December, 1920, it had 45 per cent of its reserves, which was a higher reserve than it had in December, 1919. But at this writing (July, 1921) the reserve has reached 60 per cent. The money is in New York. Go out through the agricultural states, and you will not find it. Go into the districts of silent factories and you will not find it. It is in New York. The Warburg Federal Reserve has deflated the country. A System that was intended to equalize the ups and downs of financial weather has been used “in an administrative” way to deplete the country of money.