That the arrangement for equalizing the reserves adopted in 1873 would have availed to prevent suspension on subsequent occasions is highly probable, indeed a practical certainty. In 1893 events proved that the banks had maintained payments up to the very last of the succession of disasters with the results of which they had been contending. During August the number of bank failures was not large and none of them was of great importance. We cannot, of course, know how soon money would have begun to flow back to New York, but certainly the suspension of payments could hardly have hastened the movement. From the beginning of September the reported movements of currency showed a gain for the New York banks, and for the week ending September 16th the gain was no less than $8,000,000. One month more of drain, therefore, was the most that the banks would have been obliged to endure, and for the needs of that month the banks would not, as in 1873, have been confined to the single resource of the $79,000,000 of the cash in their vaults.

Similarly, the enormous increase in the money supply of the country in November and December, 1907, would have offset much of the loss of reserve which the banks would have incurred, if they had continued to meet all the demands of their customers for cash. And, finally, it may be observed that in the unlikely event that alarm had not been allayed and suspension in the end had become unavoidable, it would not have made any practical difference to depositors whether the reserves of the banks had been but ten per cent. rather than twenty per cent. of their demand liabilities.

The fundamental defects in the banking system of the United States, in particular the absence of adequate lending power and inability to make effective use of the cash reserves of the banks, were disclosed not only during the serious crises of 1873, 1893, and 1907, but also on frequent occasions of more moderate financial strain. But the need of radical change in the banking arrangements of the country was not clearly recognized until after the crisis of 1907. The attention of bankers as well as of the public was for many years absorbed by the more urgent needs of monetary reform - after 1873, the resumption of specie payments, and after 1893, the repeal of the silver purchase law secured at once, and the establishment of the gold standard upon a firm basis which was finally accomplished with the passage of the Currency Act of 1900. Difficulties due to monetary causes were entirely absent in the crisis of 1907, and consequently the unsatisfactory state of the banking machinery and practice of the country at length became clearly evident. As a temporary measure, pending more thoroughgoing legislation, an act was passed in 1908 empowering the banks to issue bank-notes secured by bonds other than United States bonds and by commercial paper, but subject to taxation sufficiently onerous to prevent issue except in emergencies and to insure speedy retirement. These notes proved of great service during the crisis which came in August, 1914, with the outbreak of the European War. Somewhat more than $300,000,000 of the notes were issued and, although Clearing House loan certificates were also used, the suspension of currency payments was avoided. As a means of overcoming the most serious of the difficulties encountered in previous crises, the notes proved an effective device, but it was rightly believed that the banking legislation of the country was antiquated and that many and, in some directions, very fundamental changes must be made if the banks were to be placed in position to render the greatest possible service to the community in normal times as well as in emergencies. This view of the situation found expression in the Federal Reserve Act of December 23, 1913, a measure which gave the necessary legal authority for incomparably greater changes in the banking structure and practice of the country than followed the passage of the National Banking Act fifty years before.