Question

Why did the us banking system need to be reformed during the early 1900s

Answer 1

Well that was the time of the crash of the stock market, and many people were thrown into poverty. Even those who didn't take the gamble with stocks, they were not directly effected by the crash, but those around them were. So best guess is they turned to the banks for help on the matter of money, and they could not help. 

Answer 2

Banks had full access to their reserves when customers wanted to withdraw money.