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vania.51 It is still illegal for Pennsylvania trust companies to discount commercial paper, but they may buy it!

Another instance of encroachment upon the functions of banks in spite of questioned legality is furnished by the Missouri trust companies. In 1894 the Supreme Court of Missouri decided that trust companies are not banks, and may not receive deposits as banks.52 This failed to settle the matter, however. Four years later the same court passed upon the question again, and concluded that trust companies may not receive demand deposits, unless they pay interest." Hence the receiving of demand deposits by trust companies in that State now has legal sanction. No rate being specified by the court, the payment of merely nominal interest would suffice, so far as the law is concerned. There is a law of competition, however, which is another thing.

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The examples just related illustrate how the trust company, unlike the National bank, has developed according to natural rather than artificial laws. The law and its interpretation have been moulded to suit the ascertained needs of the business, instead of the business being moulded to conform to the law. There are those who believe that this process has evolved a more scientific system of banking than that of the banks themselves.

GENERAL STATUTES REGULATING TRUST COMPANIES.

During the decade of the eighties the growing attention to the trust company as an institution was further evidenced in some of the States by the passage of general laws regarding this class of institutions. New York passed such a law in 1887, since which time companies have usually been incorporated under the general law, although some have been organized under special acts.55 We have already referred to the Corporation Act of 1881 in Pennsylvania, which dealt with trust companies. It was further amended in 1885.50 Illinois passed a trust company law in 1887. Several States passed laws during this period for the purpose of regulating or restricting the business of trust companies. This subject will be discussed more at length in a subsequent chapter.

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GROWTH OF THE COMPANIES IN NUMPERS AND RESOURCES.

Returning now to the consideration of the growth of trust companies. in number and resources, the task is much simplified by the availability

51 Cator, p. 18. Bankers Magazine, Vol. LXII, p. 561.

52 Bankers Magazine, Vol. L, p. 60.

53 Ibid., Vol. LVII, p. 16.

54 The tendency to the passage of general laws was not confined to trust companies, however, but extended to other State banking institutions. See "State Banking in the United States." by George E. Barnett, p. 22 and passim.

55 Circular published in 1900 by the New York Superintendent of Banks, giving historical sketch and digest of banking laws.

56 Act of June 11, 1885.

57 Act of June 15, 1887.

of statistics which, while incomplete, furnish the means of forming a tolerably accurate idea of the progress of these institutions.

From the year 1875 or, the reports of the Comptroller of the Currency give statistics of the trust companies reporting to that official. These reports do not include all of the trust companies in existence at their several dates, as the Comptroller had no authority to compel the sending of returns from State institutions. The number of companies reported for the year ended June 30, 1875, was thirty-five. This number is, of course, somewhat less than the number actually doing business, and it is impossible to learn the exact number. The United States Mortgage and Trust Company, of New York, has annually, since 1903, published a book entitled "Trust Companies of the United States," which gives complete returns from practically all of the trust companies in existence, with the dates of their organizations. An examination of this work shows that of the companies reported, fifty had been organized during or before the year 1875. But, as the writer has ascertained by correspondence with these companies, some of them were not organized at first as trust companies. On the other hand, as already shown, a number of trust companies organized in these early years have gone into liquidation, and their names do not appear in the book above mentioned. A rough estimate, however, shows that these two considerations about offset each other, and the number of companies in existence in 1875 was probably nearer fifty than thirty-five. The former number is insignificant enough as compared with the other financial institutions at that time. As against the thirty-five trust companies, there were in 1875, according to the Report of the Comptroller of the Currency for that year, 551 State banks, 771 Savings banks and 2,087 National banks. The trust companies had deposits of $85,000,000, while the State banks had $166,000,000, the Savings banks $924,000,000 and the Nationa! Lanks $679,000,000.

Of the thirty-five trust companies reported, New York State had twelve, Connecticut ten, Pennsylvania seven, Massachusetts five and Rhode Island one. The incompleteness of this list is shown by the fact mentioned by the Comptroller, that while Illinois is credited with no companies in the list, the Financial Editor of the "Chicago Tribune" reported that there were in Chicago, June 30, 1875, five trust companies, with aggregate deposits of $5,688,574.58

A general idea of the growth of trust companies from this time on will be gained most easily by reference to the charts presented herewith. Chart A is designed to show the growth in the number of trust companies year by year. The heavy line follows the number of companies reporting to the Comptroller of the Currency each year. The dotted line indicates the approximate number of companies in existence each year as shown by figures compiled by the writer from the work "Trust Compa

58 Report of U. S. Comptroller, 1875, p. XCVII.

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nies of the United States" already mentioned. Prior to 1903, the figures are estimates; since that date they represent the actual number of companies reported.

The lines do not show the total number of trust companies in existence at any given date, as neither authority succeeded in getting re ports from all the companies. An average of the courses of the lines does indicate pretty accurately, however, the relative gain from year to year in the number of companies, and this is the essential thing the chart is intended to show.

It will be noticed that the general trend of the two lines is much the same down to about 1903. The dotted line shows the more rapid increase from 1903 to 1907; while from 1907 to 1913, more rapid and regular increase is indicated by the heavy line. These inconsistencies are undoubtedly due to different degrees of success in getting reports from the companies.

CHART A, #howing growth in the number of Trust Companies, 1875 1913.

As reported by The Comptroller of the Currency,

As compiled from Trust Companies of The United
Statee" (Entimates to 1902. Botual figures since),

Following the general trend of the lines, and averaging their courses, it will be seen that there was a moderate increase in the number of companies beginning about 1885, which continued till 1891. From 1891 to 1899 the increase was at a slower rate. Beginning in 1899 the number of companies grew very rapidly up to 1907, and a little less rapidly since that year.

The following table shows the number of companies at the dates

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The striking thing about the table is the remarkable growth in the number of companies since the year 1900. While the number of companies doubled between 1890 and 1900, during the decade from 1900 to 1910 the number increased 801, or 276 per cent., according to the Comptroller's figures, and 1,009, or 194 per cent., according to the other authority. The increase in the thirteen years since 1900 was 1,225 companies, or 422 per cent., based on the Comptroller's figures, and 1,214 companies, or 234 per cent., based on the other figures. The latter percentage is probably nearer the fact, because the number of companies given for both 1900 and 1913 is more nearly correct. Based upon the best statistics obtainable, the actual number of trust companies in the country about June 30, 1913, was between 1,950 and 2,000.*

COMPARATIVE GROWTH OF BANKS AND TRUST COMPANIES. Chart B shows the growth of individual deposits of Trust Companies, and also of savings banks, State banks and national banks. An interesting thing is the coincidence in the general features of the lines showing deposits of trust companies and of State banks up to 1902. In 1909 for the first time the deposits of trust companies exceeded those of the State banks, and they have more than kept the lead since that year. It is also to be noted that from 1897 all four classes of financial institutions had increases of deposits much greater than ever before. This does not seem to corroborate the popular impression that the trust companies are making their gains by taking business from the regular banks. It rather indicates that the trust companies are sharing with the others in a general prosperity that is unprecedented.

The following table gives the individual deposits of the same four classes of institutions for the years named, as reported by the Comptroller of the Currency:

*As we go to press, the figures of "Trust Companies of the United States" for 1914 are available, showing 1.812 companies with aggregate resources of $5,924,979,890.

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It thus appears that during the ten years from 1890 to 1900, the Trust Companies gained in individual deposits $692,000,000, or about 206 per cent.; the State Banks, $714,000,000, or about 129 per cent.; the Savings Banks, $925,000,000, or about 61 per cent., and the National Banks, $1,008,000,000 or about 63 per cent. The amount of the gain for Trust Companies was less than that for the other classes of institutions, but the percentage of gain was much larger.

The gains for the decade 1900-1910 were as follows: Trust Companies, $2,045,000,000, or 199 per cent.; State Banks, $1,461,000,000, or 115 per cent.; Savings Banks, $1,620,000,000, or 66 per cent.; National Banks, $2,685,000,000, or 103 per cent.; the Trust Companies ranking first in percentage, and second in amount of gain.

During the thirteen years since 1900, the Trust Companies made a gain of $2,543,000,000, or 247 per cent.; the State Banks $1,814,000,000, or 143 per cent..; the Savings Banks $2,276,000,000, or 93 per cent.; the National Banks $3,351,000.000, or 129 per cent. Here again the Trust Companies rank first in percentage and second in amount of gain.

As regards a comparison of the figures for Trust Companies and for the other financial institutions named, it is important to bear in mind that the reports of the Comptroller give the statistics for all National banks, and that said reports are probably more complete for State Banks and for Savings Banks than for Trust Companies. Thus, the Comptroller's report for 1907 gives the total resources of the Trust Companies of the country as 3.073 millions, whereas the figures given by "Trust Companies of the United States" is 4,285 millions. The Comptroller's report for 1907 contains figures for but one Western State,-Kansas, and for but one Southern State,Kentucky. It omits a number of important Trust Company States, among which are California and Ohio, the combined resources of whose Trust Companies in 1907 were not less than 324 millions. This incompleteness is not the fault of the Comptroller, but is due to the fact that he has no authority to compel the making of reports of Trust Company statistics by the different States."

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59 As another instance of incompleteness, take the Report for 1897. Two hundred and fifty-one companies are reported, with total deposits of $566,922.205. But the Comptroller calls attention to an investigation made by the New York Financier of returns nearest to January 1, 1897, showing 458 companies, with deposits of $675,100.000. (See Comptroller's Report 1897, page XXXVIII.)

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