This section is from the book "Elementary Banking", by John Franklin Ebersole. Also available from Amazon: Elementary Banking.
Under the operation of the National Bank Act of 1863, the United States had developed a very large number of small independent banks by 1914 which were scattered throughout the country. There were only a few large banks. The National Banking System provided for a National bank note issue unlimited in an aggregate amount, but depending upon the supply of Government bonds. These notes, although they were issued by a large number of different institutions, were absolutely secure but inelastic, owing to the methods of issue and redemption. The United States was the only country that regulated deposit banking by requiring minimum specified reserves. These reserves by law and custom were pyramided by permitting their deposit with other banks, the apex of the pyramid being in St. Louis, Chicago, and to an even greater extent in New York, where, despite every effort to keep the funds invested in liquid assets, they were not always found to be readily available.