The size of the trust estate to be administered determines the fees-but by no means the amount of your work. When you put your hand to the plow you hold yourselves out to the community as intending to drive the furrow straight-in the phrase of the day, to "finish the job."

One little estate may necessarily involve you in as much litigation as if you were conserving millions. In the small centers this is a problem. If you accept appointment as executor in a will, it is your duty to probate it. A warm contest which will divide the countryside into hostile camps, may do more harm to a bank in the small centers, than will the ordinary losses of a year from routine banking business.

The National bank in a small community is a center of dignity. When that bank is called on to sue in foreclosure as a trustee, or as executor, administrator or receiver in the manifold ways in which such action is required by its duties, its directors, who have hitherto lived in peace and contentment, must be prepared to explain to an intelligent public, agog with curiosity, or partisan feeling, why these things be.

Will you accept the guardianship of the estates of children? It seems simple enough. When, however, an attractive widow, contemplating matrimony, presents four lusty children to the president, and with his subordinates around, says, "These are your children -you must care for them!" it's a bit embarrassing, even though his Company is responsible as guardian, and especially if the principal of the trust will not care for them long.

Will you foreclose a trust mortgage, which you have accepted for a modest fee? Then you must consider the many defendants who may be required, because of peculiar complications, to be made parties; a receiver must be appointed, whose acts you will find difficult to distinguish from your own, and when the claims of prominent citizen creditors, not secured by the mortgage, are wiped out, sɔme unpopularity results.

You say these things only happen in small communities, where there is more opportunity for individual feeling to be displayed. I accept this, with reservations. The president of a great metropolitan trust company, which temporarily closed its doors, told me the same thing years ago, but it afterward was apparent that even the metropolis was not free from jealousy.

Will you act as receiver, or trustee, of a bankrupt, engaged, for instance, in the contracting business? Moved by the possibility of a favorable allowance, you have accepted

this trust, but when you undertake it, you find that it calls for skilled engineering ability, for particularly skilled business ability in connection with the work in hand, and unjess you are prepared to maintain a trust department capable of supplying these demands, you are compelled to rely upon outside advice-a dangerous experiment at best. The outsider is not interested in the capital, surplus and undivided profits of your institution, as are your executive officers, and so you find they are constantly required to advise in new fields and make momentous decisions.

A bit disquieting too are the very personal things that happen by reason of the fact that you have been named as trustee or executor in the case of an estate where the deceased was indebted to you. The acceptance of this fiduciary relation frequently puts the brake on your promptly enforcing your rights as a creditor, and places you under disadvantages that make the commissions paid as such fiduciary, trifling in importance.

Corporate Trusteeship

Corporate trusteeship presents a field alluring in appearance, but in fact its chief profit is found in the largest centers, where as trustees of trust mortgages, registrar and trans fer agent of bonds and stocks the volume of business is great enough to make it profitable.

No matter how carefully drawn the indenture appointing you, you will find in these days of State and National regulation that you have many duties to perform. Indemnity, the handmaiden of corporate trusteeship, will not always save you from much mortification in spirit to say nothing of wasted time and sometimes money.

My advice will not be that given by Punch to the man contemplating matrimony-but will be, "go slow." Competition and divided control, rather than routine difficulties, present the most serious problems in the exercise of your new powers. The competition is bound to be active, and responsibility to two masters requires a high degree of prudence and patience on your part. No one can, today, prophecy how far reaching this revolution in banking is to be.

Questions of Competition and Dual
Authority

The Supreme Court, it seems to me, went out of its ordinary course to sound a warning to the Federal Reserve Board and the States, when it said that the statute gave "that Board power to adopt rules regulating the exercise of the functions conferred, thus affording the means of co-ordinating the

functions when permitted to be discharged by national banks with the reasonable and non-discriminating provisions of State law regulating their exercise as to State corporations, the whole to the end that harmony and the concordant exercise of the National and State power might result."

This is most appropriately phrased, and is meant to be a check upon Federal Reserve Board and State governments alike. Unfortunately, human agencies must be used to promote this "harmony," and our experience with Federal Boards so far has not been altogether satisfactory. Where power resides-power will be used. Here two authorities will be claiming precedence.

It is in the character of the competition itself that one must hope for the solution of this perplexing problem. One State has already passed a statute providing that "no trust company, loan and trust company, bank or banking corporation or similar corporation, shall hereafter be appointed executor," etc., in that State, and its courts have held that this statute is valid, notwithstanding it was passed subsequent to the passage of the Federal Reserve Law. It is evident that this frame of mind is not beneficial to corporate trusteeship. It is killing the goose that laid the golden egg.

Another State, where trust companies alone and not banks, act as fiduciaries, has ruled, by its Attorney-general, that it would be in contravention of that State's laws "for a National bank to act in a fiduciary capacity." That attorney-general advises me "I have offered to submit the question to the Supreme Court but opposing counsel do not seem inclined to avail themselves of the offer."

Safeguarding Fiduciary Administration New York State, as is every other, is jealous of its State banking system. It holds out that its fiduciaries are by definite rule of law entitled to act as such; that their capital must be invested in certain high class securities; their fiduciary debts are preferred; that in these respects greater security is afforded by its trust companies than by National banks.

All of the States are fearful of an attempt to create a director-general of banks both National and State and not as a war measure. Meantime while all of this feeling is rampant, the banking business must go on, and the banking business must continue to be built on confidence.

Federal and State banking departments do not alone inspire confidence. That confidence has been created by the individual standing of the directors and officers and through them of the banks themselves. That confidence will

be lost if banks and trust companies engage in bickering and unfair competition.

Empire State Leads the Way

Because of its banking pre-eminence the eyes of the nation are on the Empire State to see how it will handle this problem. Time was when even the Federal Reserve Board held that directors in National banks might continue in certain trust companies because they were claimed not to be in competition, and the relations between many State and National institutions have been such as to make the entry of the National institutions into the direct fiduciary competition an unsettling element from every point of view.

A wild scramble for business, however, will lead to attempts at State reprisal-and what is worse, will destroy the confidence of communities in corporate trusteeship.

If is a time for conciliation-I dare not say co-operation-if corporate fiduciaries are to grow and prosper.

This Association may well give earnest thought to this problem, and so far as it legally may, counsel and guide its members.

Preservation of the Gold Standard

Mr. E. D. Hulbert, president of the Merchants' Loan and Trust Company of Chicago, commenting on the effect of the war upon monetary standards, says:

"I do not think there is any drift away from the gold standard, on the part of responsible governments. I do not see any evidence of any drift toward bimetalism, although I admit that the great quantity of paper money in circulation in Europe might easily lead to conjectures whether the adoption of bimetalism with the use of silver as a reserve would help the situation. Whether there should develop any movement of importance in the direction of a bimetallic standard will depend a good deal on the state of mind in Europe. Experience has taught us that gold is the best standard of value. It is the most stable commodity. People have come to accept it the world over as the best and most reliable form of money. The United States, more than any other nation, controls the world's supply of gold. It might almost be said that whether the rest of the world maintains a gold standard rests with the United States. This position of responsibility should lead us to take great care to foster the gold standard abroad. We can do this by not taking any more gold away from Europe in payment of debts. Let us rather accept merchandise and securities and extend long term credits."

The trust companies have it within their power not only to develop their business functions along broader lines of usefulness than ever before but also to become a most important factor in advancing the social welfare of the Nation-which, indirectly and ultimately, will exert its beneficent influence upon all other nations. The opportunity of the trust companies lies in their especial facilities for effecting a more scientific and systematic husbandry and distribution of our colossal wealth. The war was largely responsible for the better appreciation which prevails today of the relation of these two factors to our national and individual welfare.

From now on, bank and trust company officials must recognize a new duty, namely, that of acquiring more thorough knowledge

of fundamental and world-wide economic conditions, not only that they may conduct their businesses with broader vision and deeper understanding but also that they may help disseminate such knowledge and enlighten the public as to the part which such factors play in our every-day life.

The study of economics, indeed, is daily becoming more necessary to successful banking and trust company service, which no longer consist merely of financial transactions. In order completely to discharge their obligations to the public, our financial institutions must realize that they are operating in a new environment, under distinctly new conditions, with enlarged potentialities, and against a bigger background than ever before.

World-wide Knowledge Needed Today Just as the war awakened this Nation from its dream of political isolation and economic independence, and forced us to realize that the problems of the world are our problems, that no nation can live unto

*From address delivered June 12, 1919, before. the Trust Company Section of the New York State Bankers' Association at Albany.

itself any more than man can live unto himself, so our financiers, in common with other business men, have discovered that they must think beyond the confines of their institutions and must perform service beyond that which nets immediate or direct gain. They are rapidly coming to understand that the financial, social, labor, industrial, commercial and, in brief, all major economic problems of the leading countries indirectly concern them as well as. the financiers in those countries. This is due chiefly to the fact that we have been transformed from a debtor to a creditor nation during the last four and a half years, with the result that today the world owes us in excess of $10,000,000,000. And, with not only European but other peoples in dire need of capital and credit, that sum, great as it is, must be vastly augmented within the next few years by loans arranged through private channels, by the sale of foreign securities here, and by our stantly increasing foreign trade balance.

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So we have acquired a very vital interest in the economic welfare of other nations: in the redistribution of wealth effected by the war; in the depreciation of currencies the world over; in the universal readjustment of values. The recent withdrawal of governmental support by England, France and Italy from their respective exchanges, which sent our dollar to a premium in those countries, and thereby militated against the purchase of our products because the pound sterling, the franc and the lire could purchase less of our goods than prior to the so-called "unpegging" of these exchanges, is a case in point. It demonstrates how closely our interests are related to conditions in other lands. Significance of Removal of Gold Embargo

It served also to accentuate the imperative need for restoring the gold standard. Very recently the Committee on Banking of the National Association of Manufac

turers reported that, "It is not too much to say that in the whole programme of readjustment, no element is of greater practical consequence than the restoration of the gold standard. Confidence in the credit structure at home as well as the restoration of normal international exchange relationships depend upon it."

The lifting of our gold embargo by Presidential proclamation should tend to hasten a return of normal economic conditions and help restore the American dollar to parity in several countries. We have. more than one-third of the world's supply of gold coin and bullion, and, with our newly created creditor position there is no danger of any considerable loss of the precious metal; whereas, by a judicious re-allocation of gold the exchanges of our former Allies could be materially improved-both to our advantage and to theirs. How seriously rectification of the exchanges is needed is apparent when we consider that, at the time this paper was prepared, there was a 23 per cent. discount on francs in this market, 40 per cent. discount on lire and 4.8 per cent. discount on sterling. Even some of the neutral exchanges have recently gone to a heavy discount. Copenhagen, for instance, was 11.4 per cent. below parity a few days ago; Christiania, 6.5 per cent. and Stockholm, 6.3 per cent.

There are only two important European countries, in fact, whose exchanges might warrant the withdrawal of gold from the United States, namely, Switzerland and Spain. The rate for the Swiss francs in New York, when this was written, was quoted at a premium of 1.3 per cent., and Spanish pesetas were at a premium of 4.1 per cent. A fairly large amount of gold, it is true, will probably be shipped to Japan. as well as to South and Central America.

It is significant, however, to note that Great Britain has resumed shipments of gold to the United States from Canada. The first large consignment of the metal for account of the British Government since early in 1917 arrived in New York recently. And, it should be remembered, we already have far more gold than we need carry for currency and banking purposes. There is no good reason, in fact, why we should not assume a liberal point of view in dealing with our great gold stock. Our assured creditor position, our unequalled gold position, and our tremendous banking and financial strength now afford us an enviable chance to function as the great free-gold market of the world. And such a market here is absolutely es

sential, if we are to do our full part in the reconstruction period. It will open one of our biggest doors of opportunity.

Should Amend the Federal Reserve Act

And while we are discussing the removal of restrictions, I suggest that the Federal Reserve Act be amended to promote the commercial interests of the country, particularly in foreign trade, which is more vital than ever before to our National prosperity.

In the four years of operation of the Federal Reserve system notable progress has been made in the development of a market for acceptances and other commercial paper. Much of our foreign trade that was formerly financed through letters of credit, under which sterling bills were drawn, is now financed by means of dollar exchange -bills drawn either on banks or business houses in the United States and payable in dollars. Because there is a ready market here for the sale and rediscount of such bills, a market created mainly by the Federal Reserve system, banks are willing to buy this paper.

The acceptance provisions of the law will have immense significance in financing international commercial transactions. But, although in constant use abroad, acceptances of any sort were little used in this country prior to the changes in our banking practices effected by the Federal Reserve Act.

Under the old system, because of the immobility of the bulk of bills receivable growing out of commercial transactions, banks were often unable to provide the necessary credits for conducting the volume of foreign business which our traders were in every other, respect well fitted to do. Now the machinery for making liquid the paper offered by Americans trading abroad enables them to expand the volume of their business while at the same time the accommodation afforded by their banks is, if need be, correspondingly increased, but without tying up irrevocably for a definite period of time their own resources.

For the purpose of further encouraging the use of acceptances, it would be well if our Federal Reserve Law were amended so as to remove existing restrictions on the aggregate amount of bills which a bank may accept. The character of this paper is such that the limitation upon the volume of discounted acceptances in a bank's resources is unnecessary. The control of the volume of discounts may safely be left to the judgment of the banker.

Another Legislative Possibility

In the standardizing of legal instruments and charges for trust company services there is also need for legislative action in various States. Although a unification of charges for trust company services cannot be made to govern all parts of the country, as the large volume of trust business in the East necessitates smaller fees and the smaller trust business in the less developed West requires larger fees in order to place the business on a paying basis, there would be decided advantage to the trust companies and the public in a standardization of such charges wherever feasible.

Closer. Co-operation with Legal Profession

There is developing a closer co-operation of trust companies with the legal profession, and this should be encouraged and extended to their mutual benefit.

While it is not ethical for the legal profession to invite business, trust companies may and do, with propriety, invite business which very materially assist in developing legal business; such, for instance, as the stimulating of the writing of wills to be drawn by lawyers, the testing of wills by lawyers, and the rewriting of thousands of old wills which, should they become operative in their original form, would be fruitful sources of litigation.

The fact that in New York State the largest volume of litigation is that pertaining to wills, and that 82 per cent. of such litigation, based largely upon the interpretation of the instruments involved, is preventible, reveals the necessity for constructive work along this line.

When an estate is dissipated the beneficiaries frequently become dependents, and, therefore, economic burdens. The proper conservation of a small estate for a widow and children may secure her economic independence and provide the means for educating her children; whereas, if the estate is not adequately conserved and administered the widow may be forced into the ranks of the laborers and the children, uneducated, perhaps, may have to take up the burden of gaining a livelihood at a tender age.

The incalculable value of the service which trust companies rendered in this respect during the war should go far toward promoting future business of such nature for those companies, as well as afford invaluable aid in the conservation of personal and real property-not only for individuals but also for the Nation.

That is one of the doors to greater serv

ice and opportunity which must be kept open and enlarged by the trust companies. An Open Door to International Service

Another field in which the trust companies must do their full share of work is that relating to international finance and the rehabilitation of Europe. It will be necessary to co-ordinate America's financial resources to perform the task confronting us, a task which will demand the most efficient efforts of all our financial, industrial and commercial interests.

The amount which the United States Government is authorized to loan the Allies is rapidly approaching its limit of $10,000,000,000, so that, unless Congress authorizes further credits, or private banking loans are obtained here, European countries will have to meet future indebtedness to us through settlements; in the foreign exchange market or by shipments of gold neither of which expedients would be desirable for our debtors or ourselves.

It seems clear that the principal means for assisting other peoples who need our financial aid will be the extension of long credits to them and by the purchase of their securities. But if such securities are to be absorbed here in adequate quantities the American public must appreciate the necessity for and the advantage of buying them, and in order to accomplish that a National campaign of education will have to be undertaken.

It is in this respect that the trust companies and banks can perform an invaluable National and international economic service -as they did during the war in helping to teach the public to invest in Government bonds. The story of how successful our financial institutions were in that supreme. patriotic effort not only constitutes one of the most illuminating chapters of the country's fiscal history but also affords us

a

source of splendid inspiration for the future. It revealed to those institutions vast powers which they had either neglected to cultivate properly or had not realized even existed. Now those potentialities must be used in speeding the reconstruction and readjustment tasks of the world.

Our Ability and Resources

When we recall the ease with which we not only subscribed $18,500,000,000 to the five Liberty Loans but offered the Government $7,000,000,000 in excess of that colossal sum; when we remember that have sustained the heaviest taxation on record; when we take cognizance of our vast National wealth.

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