Supposing, however, that a banker has, through experience, guided by legislative requirements, determined the approximate amount of reserve which he needs to carry in ordinary circumstances, it will be a matter of constant watchfulness on his part to see that he is able to maintain the proper balance between quick and slow assets. If, for example, a number of his customers are obliged to ask for extensions of credit, he does not receive payments either in the form of checks on other banks or cash or of reduction of his own outstanding liabilities that he may have counted upon. He thus finds that his liabilities are larger than he had expected in proportion to his quick assets. On the other hand, if he is too conservative he may find that he misses much good business by holding his customers to too short a period of credit, thus obliging them to go to other banks which are more liberal, although he might with reasonable safety have carried such paper in his portfolio. Good banking always provides an adequate means of liquidating claims, but profitable banking prevents these means from becoming and growing into a dead weight upon the institution as the outgrowth of undue conservatism.

If, however, as often happens, a community becomes involved in long-term credit operations and a given bank has allowed itself to undertake operations that are really beyond its strength, the result is a tendency to cut down the available short-term assets and especially the cash or credit available for payments, with the consequence that some means must be found of restoring them. Every banker has at times to contemplate the necessity of employing these means. In general it is a choice between the following courses of action:

1. To suspend or refuse further applications for credit from customers;

2. To discourage customers by raising his rate of discount in such a measure as to drive away the less necessary applications;

3. To discount some of his paper with another bank or to sell to that bank a part of his assets;

4. To purchase or acquire specie, perhaps abroad, or in unusual cases at home, paying for it in securities or long-term assets, and in return receiving a shipment of actual coin or currency.

All of these methods are at times employed by bankers in the process of restoring depleted reserves. The question which method to employ and how to employ it is, however, a problem which involves the full issue of sound and careful banking management.