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amount; Virginia, five per cent. of the capital, and not less than $12,500 nor more than $25,000 in amount. In Ohio, the amount is $100,000 for companies whose capital is more than $200,000, and $50,000 for smaller companies. Instead of a deposit, South Dakota requires trust companies, before undertaking any trust, to furnish a bond in favor of the State in an amount equal to the capital.

RESTRICTIONS IN RELATION TO LOANS.

The majority of the States having any kind of trust company legislation place restrictions on trust companies regarding their loans, their investments or their total liabilities. Such restrictions vary greatly in the different States, being quite ample in some, and very meagre in others. The most common provisions are those forbidding trust companies to make loans on their own stock as security, and to make loans to their directors, officers or employees. Where the classes of investments for capital and trust funds are specified, the investments permitted are usually in municipal bonds, railroad bonds and mortgages secured by ample margin on real estate. The provision that neither the deposits nor the loans may be allowed to exceed ten times the amount of the paidup capital and surplus is found in the statutes of California, Illinois and Maryland; but in the last-named State it does not apply to funds deposited by order of the courts. Colorado forbids trust companies to invest in the stocks or bonds of private incorporated companies. Among other provisions sometimes found are those limiting the amount of loans to one person, firm or corporation, the limit often being ten per cent. of the capital and surplus, except that on loans secured by collateral it may be twenty per cent.

Many of the States provide that trust funds and accounts must be kept separate from all other funds and accounts of the company.

Largely as a result of efforts made by the American Bankers' Association, statutes have been passed in a number of States forbidding the use of the word "trust" in titles by any but regularly organized trust companies. The following now have legislation of this character: Alabama, California, Colorado, Connecticut, Hawaii, Indiana, Iowa, Kansas, Maine, Massachusetts, Minnesota, Mississippi, Montana, New Jersey, New York, Oregon, Rhode Island, Texas, Washington, West Virginia, Wisconsin and Wyoming.

TRUST COMPANY RESERVES.

The question of trust company reserves is of special interest. The fact that trust companies compete to so great an extent with banks has resulted in a growing demand from the banks especially, and from the general public to some extent, that trust companies be placed under the same regulations as banks, particularly in the requirement of a reserve fund. The battle over this point has been waged with special fierceness in New York, where, until 1908, there was no provision for reserves of

trust companies. That there is need for such agitation is shown by the fact that about a third of the States and Territories have no satisfactory requirements regarding reserves. This does not mean, of course, that trust companies in these States do not actually keep reserve funds, for the unwitten laws of business and of competition are quite as insistent upon obedience as are the laws of the statute books. The bestmanaged companies everywhere keep as large reserves as their business demands; and it is for the poorly-managed concerns that the statutory provisions are necessary, just as criminal laws are needed, not for the law-abiding people, but for the lawless. If the wisdom of State regulation in any particulars is conceded, the necessity of a requirement for an adequate reserve fund certainly must be.

An examination of the statutes shows that where the question has been taken up and acted upon by the State legislators, the opinion has quite generally prevailed that the reserve required to be kept by trust companies ought to be about the same as that required of State banks.

The following table shows the reserves required of trust companies in various States. Except where otherwise stated, the percentages refer to the ratio of reserve to aggregate deposits. In some cases the reserve named in the table applies to trust companies only when they do a banking business; in which case it is frequently the same as for banks.

Alabama
California

Connecticut

Idaho

Kansas

Louisiana

Maine

15%, 2-5 in cash.

20% in cities of 200,000 or more; 15% elsewhere: 1⁄2 in cash. 15%, 4-15 in cash.

15%, 2 in cash.

25% of demand, 10% of time deposits.

25% of demand deposits, 8% in cash.

15% of deposits payable on demand or within ten days.

Massachusetts In Boston, 20% of aggregate deposits less time deposits not payable within thirty days; elsewhere, 15% of same; 2-5 in cash. Reserve companies in Boston, 1⁄2 in cash.

Michigan

Missouri

Montana

New Jersey

New Mexico
New York

20% of "Matured obligations and money due and payable." 14 in cash.

15% of demand deposits.

15%.

15% of demand deposits, 1-5 in cash.

15% of liabilities, less deposit with Territory. 2-5 in cash.
Reserves are figured on aggregate deposits less trust funds, time
deposits not payable within thirty days, and deposits secured
by New York State bonds.

In New York city, borough of Manhattan, 15%, all in cash.
In New York city, other boroughs, 15%, 2-3 in cash.
Elsewhere in state, 10%, 2 in cash.

North Carolina 15%, 2-5 in cash.

Ohio Oregon

Pennsylvania

15%, 6% of demand and 4% of time deposits in cash.

15% of demand and 10% of time deposits, in cities of less than
50,000; elsewhere, 25% of demand and 10% of time deposits.
1-3 in cash.

15% of demand and 71⁄2% of time deposits, 1-3 in cash.
Rhode Island 15%, 2-5 in cash. (Savings department excepted.)
South Dakota 25% of demand and 10% of time deposits.
Texas

25% of demand deposits, 1-10 in cash.

Washington 20% of demand deposits.

West Virginia 15% of demand deposits, 2-5 in cash.
Wyoming 25%.

REPORTS AND EXAMINATIONS.

Whatever restrictions are placed upon these corporations by the statutes, such restrictions must evidently be of little avail in the cases of those companies which are inclined to evade the law, unless means be provided of keeping the State officials acquainted with the way in which their business is being conducted. The natural ways of accomplishing this result are by means of frequent reports and of examinations. The value of reports is of course in direct ratio to the honesty and frankness of the officials of the company making such report, and their usefulness therefore becomes slight when made by dishonest officers. It is a matter of common knowledge that reports may be easily "doctored" so as to make an insolvent institution appear very prosperous, and that the last reports published by defunct companies usually indicate a sound condition. But if the requirement of reports be made in connection with frequent examinations which reveal the truthfulness or untruthfulness of the reports, they serve a useful purpose.

The laws now require trust companies to furnish reports in over forty of the States and Territories. The frequency of such reports varies. from one to five times per annum; and in the States having the most carefully prepared laws on the subject, special reports may be called for at any time by the State official to whom the reports are made. In Tennessee the reports are not made to any official, but are merely published in a newspaper. A number of the States designate the character of the information to be given in the reports, and some of them specify in detail and at some length the exact form required for such reports, the form in a few States requiring a complete list of all investments, and a description of the property held in trust. The completeness of these reports is in striking contrast with the meagreness of those which satisfy the requirements of the law in some of the States, where the provisions on the subject are most unsatisfactory. Most of the States which require reports provide that they must be published in a local newspaper.

Trust companies are liable to some sort of an examination by State officials in about forty of the States; but in about one-fourth of these the examinations need not be made periodically, but only at the discretion of an official who very probably has little time or inclination for the work, so that companies may go for years without examination. In all of the States the courts probably have the right to investigate a trust. company's handling of trusts committed to them by such courts to the same extent as though the trusts were committed to individuals. This right is specifically mentioned in a majority of the States. A few States also provide that the books of the company shall be open to inspection by persons interested in any trust held by the company.

Where periodical examinations are required, their frequency is either once or twice per annum, with special examinations at any time at the discretion of the examining official.

The State officials under whose supervision trust companies are placed in the different States vary greatly. Where a State banking department is in existence, the head of that department has supervision of trust companies. In a few States this duty is entrusted to the State Insurance Commissioner. In other States it is exercised by the State Auditor, the State Treasurer, or the Secretary of State. In the District of Columbia the Comptroller of the Currency has supervision of trust companies.

In over a dozen States trust companies are under practically the same regulations regarding reports, examinations, etc., as the State banks.

The principle of State supervision of banks, insurance companies and other financial institutions is pretty thoroughly established in this country, although there are those whose strong objections to "paternalism" in government lead them to look with disfavor upon such supervision. The excellent record of the National banking system certainly affords strong argument for Government supervision of banks. This is perhaps not the place to discuss the general question; but if the principle of supervision is accepted, as in the writer's opinion it ought to be, there is certainly great room for improvement in the laws of most of the States and Territories in the regulation and supervision of trust companies. Less than one-half of them can be said to have satisfactory statutes for the control of such institutions.

On the other hand, it may be said with much truth that great progress has been made, and that, considering the short time that trust companies have been a factor in the financial world, the progress has been quite remarkable. It took many years to develop our banking systems out of the chaotic conditions of the first half of the nineteenth century. Then, too, the attitude of the trust companies themselves promises much for rapid advancement in legislation regarding them. The great majority of the leading companies welcome the placing of greater safeguards about the business. In a number of instances legislation designed to regulate trust companies has come through the agitation of the subject by the trust companies themselves. Many trust companies in States where the laws do not require examinations are in the habit of having their business thoroughly examined by expert accountants.

CHAPTER V.

SUMMARY OF STATE AND TERRITORIAL LAWS RELATING TO TRUST COMPANIES.

The aim in the preparation of this summary has been to include the essential facts, greatly condensed, of the laws of the several States and Territories specifically relating to trust companies, Effort has been made to have it correct as far as it goes, and to include the latest legislation on the subject. The scope of the work is, however, limited to a summary of statutes specifically relating to trust companies, and no effort has been made to include reference to all corporation or banking laws that might be construed as applying to trust companies.

The writer wishes to acknowledge his indebtedness to officials of the various States and Territories for copies of State and Territorial laws on the subject and for information furnished; and also to E. A. Feasel, Librarian of the Cleveland Law Library, for courtesies extended in the use of the library, without which the preparation of this summary would have been impossible.

ALABAMA.

THRE

HREE or more persons may incorporate for the purpose of carrying on any lawful business, under the Business Corporation Act, section 16 of which defines the powers of banks and trust companies doing a banking business. The powers specified are to do a regular banking business, including discounting; to make loans of all kinds; to issue bills to circulate as money, upon the terms prescribed in the Constitution of the State; to become trustees for any purpose; to be appointed and to act as executors, administrators, guardians and receivers; and to "do any business and exercise any powers incident to the business of trust companies doing a banking business." Married women and children may control their own deposits. Stockholders are not subject to double liability. Stockholders have the right of access to the books and records at reasonable and proper times. Trust companies may consolidate with other banks or trust companies.

Reports according to a form prescribed by him must be made to the State Treasurer not less than twice each year, such reports to be as of any past day specified by the Treasurer. They must be published in a local paper. The State Bank Examiner, who is under the direction of the State Treasurer, must examine each company at least once a year, without previous notice, and oftener if so directed by the State Treasurer. The capital required is $25,000 in towns of less than 5,000 inhabitants; $75,000 in cities of from 5,000 to 30,000; $100,000 in larger cities. The reserve required is 15 per centum, of which two-fifths must be in cash in vaults. Loans may not be made to officers or employees "without good security." Loans to one party may not exceed 10 per centum of the capital, surplus and undivided profits, unless amply secured by good collateral or approved by a majority of the board of directors.

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