The federal reserve banks, conforming to the practices of the central reserve banks of Europe, do not pay interest on reserve balances. To do so would force the central reserve bank to invest an undue proportion of its funds in order to earn a return, and this tying up of the reserves would weaken the reserve position. That was one of the defects of the national bank plan. Though the cessation of interest payments has caused considerable complaint by country banks, there are, nevertheless, certain compensations. One of these is that the reserve requirements have been so much lowered that balances formerly carried with correspondents may be brought home and, on the basis of these balances, large extensions of loans at good rates are made possible. The country banks also have such a highly dependable source of accommodation in the federal reserve banks that they can loan to an amount closer to their minimum reserve limit. The loss on reserve balances may be considered as premium for security against panic.