356 
BANKING STANDARDS 
market, therefore, which are reflected in the changes in the volume of 
funds in New York and in changes in money rates in that market, are 
national in character and have a definite relationship to changes in 
credit and banking conditions in all parts of the country.”*! 
That banks in all parts of the country through correspondent 
and other relations? are linked together? through debtor and 
creditor relationships,’* and that these relationships are inter- 
twined with business growth and decline are facts well under- 
stood. Indeed, the “complicated relationships of creditor and 
debtor . . . . make the disaster of one enterprise a menace to 
many. On this financial side of their operations, the banks bear 
a relation to all other enterprises not unlike that which the rail- 
ways bear on the industrial side; for most enterprises need bank 
credit not less than they need freight service. As a serious con- 
gestion of railway traffic applies the brake to industrial operations, 
so any hampering of banking operations applies the brake to 
business dealings.”*? 
To consider at length the interrelations of banks the country 
over and their connection with business would be to emphasize 
the obvious. Our only interest in calling attention to them is to 
indicate the background of interdependence in which must be 
11 Annual Report of the Federal Reserve Board, 1925, p. 15. 
12 The duties of correspondent banks “may be of a more or less elaborate char- 
acter or they may be comparatively few in number. The country correspondent 
of a city bank usually does nothing for that bank except to collect funds, remit 
them, and carry a balance in its favor. The city correspondent for a country bank 
does the same kind of work, but is ordinarily called upon to carry a larger balance 
and to allow interest upon it. From time to time it may be allowed to invest this 
balance or a part thereof, passing upon the securities or notes that are taken and 
thus morally guaranteeing their goodness. Conversely, it may be asked to con- 
vert such securities or notes into cash through repurchase or rediscount. It may 
also be asked to open foreign credits on behalf of the country bank and to trans- 
act various other kinds of business. The city bank usually supplies its correspond- 
ent information from its credit files, and the latter may be occasionally requested 
by the city bank to supply information regarding some individual or concern in 
its own immediate neighborhood as to which the city bank wishes to be informed.” 
H. Parker Willis and George W. Edwards, Banking and Business (New York, 
1922), p. 241. 
13 Ag to the manner in which this is effected for member banks in the Boston 
Federal Reserve district, see Appendix IL 
14 «An important class of borrowers from reserve city banks is their correspond- 
ents. . . . . In general, the lending bank stands ready to supply the reasonable 
requirements of the correspondent, but only in proportion to the average balance 
carried and with due regard to the applicant’s assets and borrowings elsewhere and 
within the limitations set by law.” Ray B. Westerfield, Banking Principles and 
Practice (New York, 1921), Vol. IV, p. 871. 
15\W. C. Mitchell, Business Cycles (New York, 1927), p. 102.