Such a national system must be supported by every banking unit; by every individual bank carrying its part of the commercial burden, and providing its proper share of the insurance of commercial safety by contributing its proper proportion of the necessary reserves, both local and national. MR. MERCHANT: Mr. Banker, I heartily approve of every word that you have said, and there can be no possible doubt about the result of a discussion of this phase of this question by the American people. There is one question, however, that I desire to ask you before we pass on, as we may overlook it. Is it not true that our National Banks are now carrying 20 per cent reserves of which 17 per cent are cash? Are not these reserves large enough to meet all emergencies? MR. BANKER: I presume you gentlemen all know just how the National Banks carry their reserves; but fearing that you do not, I will explain the system to you. All so-called country banks are required to carry 15 per cent reserves; that is $15,000 cash against every $100,000 of deposits; that they may send 9 per cent or $9,000 for every $100,000 of deposits away to what we call reserve cities. Now, there are 320 banks in 48 of these reserve cities. These reserve cities are required by law to carry a reserve of 25 per cent, or $25,000, for every $100,000 deposits; but they may send away 12-1/2 per cent, or $12,500, for every $100,000 of deposits to a central reserve city, of which there are three: New York, Chicago and St. Louis. These central reserve cities must carry 25 per cent cash reserves or $25,000 in cash for each $100,000 of deposits. Experience shows that these 320 banks in the 48 reserve cities and these 55 banks in the three central reserve cities keep all of their money loaned out all of the time; that is, right up to the reserve limit. Since they have no margin, when called upon for anything more than the usual daily current requirements, something extraordinary must be done to meet the demand. Loans must be called in and paid off. But since these same banks that are calling loans are supposed to be carrying the real, the final, the ultimate reserves, a deadlock follows, and the borrower is up against it; rates go almost anywhere that the banks want to put them; from 1 per cent to 10 per cent, to 20 per cent, to 100 per cent, or even 1,000 per cent; I believe that's the record rate. In other words, we have no true, final reserves in this country at all, for you cannot break the Government limit fixed by statute, and therefore we have a complete lockup all along the line, until through straining, something breaks somewhere.