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companies, which was adopted in 1887 and which has terminated the granting of special charters for such purposes."14
This company has had an important place in financial history during its fifty-odd years of life, and its list of directors and officers has included men of national prominence. During the last two years of the Civil War, when the financial problems of the Government were most serious, John A. Stewart, then Secretary of the company, at the earnest request of President Lincoln, undertook the work of Assistant Treasurer of the United States in the city of New York. Mr. Stewart became President of the company in 1865, and served with conspicuous success until 1903, when he tendered his resignation. He was succeeded by exSecretary of the Treasury Lyman J. Gage.
During its half century of life, the company has paid to those who entrusted to it their idle moneys for accumulation more than thirty millions of dollars in the way of interest on such funds.15 Its statement on July 1, 1907, shows total resources of $77,711,640; capital $2,000,000; surplus and profits $12,513,709, and deposits in trust $61,455.947.
In 1857 the Merchants' Loan and Trust Company, of Chicago, the oldest existing bank in the State of Illinois, was granted a special charter by the Legislature of that State. Under this charter the company was authorized to do a general trust as well as banking business; but it did no trust business until about 1880, and did not make a specialty of such business until recent years. Its trust department was organized in
There were some other companies with the word "trust" in their titles incorporated in Illinois at this time and a little later, but they were essentially State banks with a different name. Among these were the Chicago Loan and Trust Company, chartered in 1857, and the Real Estate Loan and Trust Company. Neither is now in existence.17
It is thus evident that down to the time of the Civil War the number of companies having the word "trust" in their titles was very small, and the number that actually undertook the trust business probably did not exceed half a dozen. That there were not more trust companies organized during this period seems at first thought somewhat remarkable in view of the success of the four companies first mentioned, and in view of the fact that this period was prolific in the formation of State banks. President Jackson's successful fight against the second Bank of the United States, followed by the removal of the public deposits to "pet banks," and the downfall of the Government bank, opened the field for new financial institutions. That field was, however, almost wholly for concerns that issued circulating notes, and this function was evidently not a part of the business of insurance companies, which were at that time, as
14 Fiftieth anniversary circular of the company, 1903, p. 8.
15 Ibid., p. 7.
16 Letter from the Secretary of the company.
17 Cator, p. 19.
we have seen, the only corporations engaged in the trust business. several recent writers have pointed out, the business of handling deposits, which is now so important to most trust companies, was then of slight consequence as compared with that of note issue.
RELATIVE PROGRESS OF TRUST COMPANIES AND SAVINGS BANKS.
Another point of interest in this connection is the relative progress of the savings bank and the trust company movements. Each had its origin in semi-philanthropic effort (as did also the insurance business), though doubtless the savings bank movement partook more especially of this characteristic. The two classes of institutions were established at about the same time, the first savings banks in the United States having begun business in 1816-one in Philadelphia and one in Boston. The growth of the savings banks, after the first few years of experiment, was rapid, and they became an object of public interest almost from the start. There were thirty-six savings banks in the country in 1830, with deposits of nearly $7,000,000; in 1835, fifty-two banks, with deposits of over $10.500,000; in 1850, 108 banks, with deposits of over $43,000,In 1885-about the time that the trust-company movement began in some earnest-there were 646 savings banks, with deposits of $1,095,000,000.18 Trust companies, on the other hand, were established half a century before they began to attract general attention, and where known at all in the early years the trust business was looked upon as only one of the less important functions of insurance companies. For this marked difference in the early history of the two classes of institutions, one explanation suggests itself which is quite sufficient to account for the difference. It is that the savings-bank movement began when the country had reached a condition wherein its need was felt, while the trust company was established in advance of any recognized need. Indeed, as we shall see, the conditions which make possible that part of the trust company's business which has to do with large enterprises of a corporate nature have not existed until within the last two or three decades.
It will be interesting to get an idea of the way in which the trust business was regarded in New York about the middle of the last century. In THE BANKERS MAGAZINE for November, 1854,19 there appeared an article on "The Trust Companies of New York." These are given under three heads, viz.:
1. The New York Life Insurance and Trust Company.
2. The United States Trust Company, of New York. 3. Life Insurance Companies.
The Farmers' Loan and Trust Company is included with regular life insurance companies under the third head. Of the United States Trust
18 Report of Comptroller of the Currency, 1902, p. 420. .
19 Bankers Magazine, Vol. IX, p. 321.
Company, it is remarked that it does no life-insurance business-only "receiving moneys on deposit, and executing trusts." The figures are given for the two companies above named, among the items for the New York Life Insurance and Trust Company, being "deposits in trust, trust accumulation, life insurance, annuity granted, and receivership account." After a description of the two companies, the article proceeds: "There are other companies in the city which, if not strictly termed trust companies, are yet so in fact, as they are the depositories of funds that will not be demanded for a long series of years, and on the solvency and stability of whose affairs much depends. We allude to the life insurance companies."
ORGANIZATION OF TRUST COMPANIES AFTER THE CIVIL WAR.
The last year of the Civil War and the years immediately following saw a very distinct movement toward the formation of trust companies, and marked its spread into new territory. Of the companies now in existence over forty began business during the years 1864-1875.20 However, many of these companies were in their early years not trust companies, but ordinary banks. The States represented were Pennsylvania, New York, New Jersey, Maryland, all the New England States except Maine, Illinois, Iowa and Georgia. In the eight years following 1865 about thirty-seven new charters were granted in Pennsylvania; very few of them, however, were used.1
The Union Trust Company, of New York, was chartered in 1864 and began its work in 1865; as did also The Provident Life and Trust Company of Philadelphia, both companies transacting a trust business from the beginning. The Trust and Deposit Company of Onondaga, at Syracuse, N. Y., began business in 1866, undertaking from the first such trust business as was committed to it." 23 The year 1867 saw the beginning of the Safe Deposit and Trust Company, at Pittsburg, Pa., and of the Rhode Island Hospital Trust Company, of Providence, R. I. One of the leading objects of the organization of the latter was to serve as a pecuniary helper to the Rhode Island Hospital, then in its infancy. This company, which was modeled in part after the United States Trust Company, of New York, was given a threefold character by its charter: "First, a bank, with all banking powers except that of issuing a currency; second, a savings institution; third, an incorporated executor, administrator and trustee of the estates of decedents and of the living who might desire to avail of its services."24
20 See dates of organization of the various companies, given in "Trust Companies of the United States," published by the U. S. Mortgage and Trust Co., of N. Y.
21 Cator, p. 16.
22 Letters from the trust officers of the companies.
23 Letter from the Secretary of the company.
24 Circular issued by the company, giving its history.
In 1868 were chartered the Brooklyn (N. Y.) Trust Company, which commenced a trust business at once; the Worcester Safe Deposit and Trust Company, of Worcester, Mass., which, however, did not accept any trust until 1881; and the Hartford (Conn.) Trust Company, which did not enter into a trust business until 1899.25 Among other companies chartered in New York during the sixties were the New York Guaranty and Indemnity Company, 1864; the National Trust Company, 1867, and the New York Mercantile and Trust Company, 1868.20 All three have passed out of existence. The Northern Trust Company of Philadelphia was established in 1881, transacting trust business from the start.27
Boston now became interested in the movement, and in 1871 the New England Trust Company, which had been chartered in 1869, began business, receiving its first trust in May of that year.28 The Massachusetts Trust Company, of Boston, chartered in 1870, also began business in 1871, but did not engage actively in the trust business until 1887.29 By 1875, besides other companies in New York, Pennsylvania, Connecticut and Massachusetts, there had begun business the Camden Safe Deposit and Trust Company, of Camden, N. J., which exercised at once its powers to act as executor, administrator, guardian, agent, etc.; The Connecticut Trust and Safe Deposit Company, of Hartford, which at once undertook trust business;29 and the Illinois Trust and Savings Bank, of Chicago, which, though authorized by its charter to accept and execute trusts, did not use such authority until 1888.80
Meantime during the sixties there had come into being a class of institutions whose business is now being taken up very generally by trust companies—namely, the safe-deposit companies. The Safe Deposit and Trust Company, of Baltimore, Md., was organized in 1864 as a safedeposit company only, its trust business being taken on in 1876.31 The Fidelity Trust Company, of Philadelphia, was established in 1866 as the Fidelity Insurance, Trust and Safe Deposit Company. While this company undertook the other lines of business indicated in its title, it made a specialty of the safe-deposit business, and claims to be the pioneer company in the country in this business.: The Boston Safe Deposit and Trust Company was organized in 1867 as a safe deposit company only; its name being changed and trust functions added in 1874 and 1877. THE BANKERS MAGAZINE for October, 1866,33 mentions the recent organization of the Safe Deposit Company, of New York, which by its charter was restricted to the safe-keeping of valuables.
25 Letters from officers of the companies. 26 Bankers Magazine, Vol. XXIX, p. 678.
27 Letter from the Treasurer of the company.
28 Letter from the trust officer of the company. 29 Letter from the Secretary of the company.
30 Letter from the Secretary of the company.
31 Letter from the Vice-President of the company.
32 Letter from the Vice-President of the company.
33 Bankers Magazine, Vol. XXI, p. 316.
The renter of the safe exclusively held the key. Rents for the safes were $20, $30, $35, $40 and $45 per annum. The article says: "A similar company has been formed at Philadelphia and Cincinnati, and others are proposed in large cities." The same magazine in September, 1871, stated that there were many such companies in New York, Boston, Philadelphia, Hartford, Chicago "and other cities." The other cities must have included Baltimore and Cincinnati. It mentions the Chicago Fidelity Safe Depository, just established, with which was to be associated the Guarantee and Investment Association. The latter had a fiduciary and an executive department, and handled the "management of estates and executory trusts."34 Hardly had the company been started when the great Chicago fire occurred. Its vaults were unharmed, and there was "not a paper scorched, or wax melted."3 In a list of five concerns doing this business in New York city are included the National Park Bank vaults, and the firm of Ball, Black & Co., jewelers. The arrangements of one of the Philadelphia companies are described, and they show that this business was conducted in most particulars as it is now, but with more red tape. Accommodations were made for ladies, in some of these companies. Doubtless the organization of safe-deposit companies afforded great relief to the banks, which (as is the case still in some communities) did a great deal of safe-deposit work gratuitously. In 1873 THE BANKERS MAGAZINE referred to the "habit of leaving bonds, etc., for safe-keeping in the vaults of banks," and added that "a bank is never paid" for such services.36 This is not the only function of the modern trust company that the old-time bank used to perform without charge, and also without legal responsibility. 37
FREEDMAN'S SAVINGS AND TRUST COMPANY.
An account of the companies doing business during this period would be incomplete without reference to the Freedman's Savings and Trust Company, although this was a savings bank rather than a trust company. This institution was established through the efforts of Charles Sumner and others, in 1865, as a measure of philanthropy to aid the negroes in accumulating property for support in their newly-gained state of freedom. For some years its business prospered greatly, and thirty branches were established in the Southern States. In 1870 its charter was amended so as to loosen the restrictions on its investments; and this action, together with the panic of 1873, proved disastrous. The company became in
34 Ibid., Vol. XXVI, pp. 161 to 164.
35 Ibid., Vol. XXVI, p. 632.
36 Ibid., Vol. XXVII, p. 871.
37 In 1876 a decision rendered by Justice Allen stated that National banks are not authorized to receive articles for safe-keeping, and cannot be held responsible for same. Bankers Magazine, Vol. XXX. pp. 222-229. For an able discussion of other trust company functions undertaken by national banks without legal authority, see Mr. Breckenridge Jones' paper on "The Trust CompanyA Necessity," in Proceedings Trust Company Section, A. B. A., 1908.