But, unfortunately, the law imposes restraints upon the national banks which seriously interfere with the wise discretion of those institutions. As the law now stands, the banks are liable to be wound up at the order of the Government if they permit their lawful money reserves to fall below 26 per cent. of their legal deposits. This establishes a "dead line" which is so dreaded when approached that it becomes almost a panic line. When that limit is reached, the banks are compelled to contract their loans; and, in certain conditions, the contraction of loans means forcible liquidation, without regard to consequences. Thus the very contrivance designed to protect the banks becomes a source of most serious danger to their customers and therefore to the banks themselves; and, in times of monetary pressure, it is the most direct provocative of panic. Were the banks allowed to use their reserves under such circumstances, a fund would be provided for mitigating the force of the crisis, and the danger might be gradually tided over; but, as it is, the banks can legally do little or nothing to avert panic; on the contrary, the law compels them to take a course which precipitates it; and when the crash has come, they have to unite in common cause to disregard the law and do what they can to repair the catastrophe that a preposterous enactment has helped to bring about. This is one of not a few unwise restrictions upon our national banks which needs to be stricken from the statute book. These periods of the breaking-down of unsound enterprises and of the weeding out of insolvent debtors and of liquidation of bad debts can never be wholly averted; nor is it desirable that they should, for they are essential to the maintenance of a sound and wholesome condition of business; but it is a grave reproach to our legislators if, when the day of purgation comes, the law treats the deserving and the undeserving with equal severity.🏁

But, unfortunately, the law imposes restraints upon the national banks which seriously interfere with the wise discretion of those institutions. As the law now stands, the banks are liable to be wound up at the order of the Government if they permit their lawful money reserves to fall below 26 per cent. of their legal deposits. This establishes a "dead line" which is so dreaded when approached that it becomes almost a panic line. When that limit is reached, the banks are compelled to contract their loans; and, in certain conditions, the contraction of loans means forcible liquidation, without regard to consequences. Thus the very contrivance designed to protect the banks becomes a source of most serious danger to their customers and therefore to the banks themselves; and, in times of monetary pressure, it is the most direct provocative of panic. Were the banks allowed to use their reserves under such circumstances, a fund would be provided for mitigating the force of the crisis, and the danger might be gradually tided over; but, as it is, the banks can legally do little or nothing to avert panic; on the contrary, the law compels them to take a course which precipitates it; and when the crash has come, they have to unite in common cause to disregard the law and do what they can to repair the catastrophe that a preposterous enactment has helped to bring about. This is one of not a few unwise restrictions upon our national banks which needs to be stricken from the statute book. These periods of the breaking-down of unsound enterprises and of the weeding out of insolvent debtors and of liquidation of bad debts can never be wholly averted; nor is it desirable that they should, for they are essential to the maintenance of a sound and wholesome condition of business; but it is a grave reproach to our legislators if, when the day of purgation comes, the law treats the deserving and the undeserving with equal severity.🏁