Another evil of the system of redeposited reserves arose from the fact that the actual available reserve was much less than the minimum reserve required by the banking laws, not only because of the inconvertibility of the call loans as above described, but also because much of the reserve was fictitious. A great deal of the balance carried with the reserve agent was created by remitting checks, drafts, bills of exchange, notes, and collection items in general for collection and credit. If credit was given in advance of actual collection, the country bank gained in reserve balance, but the reserve bank had items that were inconvertible,.

at least for a day or so, because it is physically if not financially impossible to secure immediately the cash equivalent of credit items. When the country bank prepared its cash letter and remitted a number of cash items it was a common practice to credit its reserve account; during the day or days this letter was in the mails a discrepancy would exist between its reserve according to its books and its reserve according to the books of its reserve agent. Upon the arrival of the cash letter, credit for the amount either was given immediately to the country bank or was deferred one or more days, according to the contract between the two banks but the too common practice was to give immediate credit. Many of the country banks, however, refused to reciprocate and permit their accounts to be immediately charged with the cash letters sent to them by the reserve bank. Instead they would insist that they be permitted to remit to the reserve bank after the items had been examined and charged to the customers drawing them. The common method of remittance was by draft on the reserve city. The result of these practices was that no small fraction of what were booked as Cash Reserves was afloat in the mail. The amount of this "float" was variously estimated between $300,000,000 and $500,000,000.

The inconsistency of the system was further exemplified in the distinction drawn between "gross deposits" and "net deposits." Net deposits were the deposits after certain deductions were made, among which were items in the process of collection; gross deposits included all items tendered by and credited to depositors. The law did not specify against which kind of deposits - net or gross - the per cent reserve should be calculated. It was the practice of the country banks to count the gross deposits with its reserve agent in calculating its reserve balance, but only its net deposits in calculating the amount of reserve required. Against the amount of items in the process of collection, therefore, no reserve was kept, although these items were counted as part of the reserve to support the other deposits.