Imágenes de páginas
PDF
EPUB

for eight years, and only three after fourteen years. These early companies combined the trust business with the insurance business. It was many years later-before the formation of trust companies as institutions apart from insurance companies began. After the Civil War a number of companies were organized, and the total number in 1875 was not far from fifty. During the later eighties a very distinct movement for the formation of trust companies began, which was lessened in degree during the early nineties, began again with phenomenal energy about 1897, and has continued in an increasing degree since that year.

During its career the trust company has undergone a radical evolution in the character of its business. To its original functions of trustee, agent, guardian, etc., have been added not only more extensive trust functions, such as executor, administrator, fiscal agent, etc., but other duties not contemplated by its originators. Most prominent among these has been the business of banking, which trust companies in many States now undertake to the same extent as do the State banks and Savings banks. The growth of corporate undertakings has brought to the trust company many added duties as representatives of such corporations in various capacities. Since the Civil War many companies have added safe-deposit departments. In some States other lines of work have been added, including fidelity and title insurance.

The conspicuous thing about the development of the trust company is that it has been able, largely through lack of legislative restrictions and because of the general breadth of its powers, to adapt itself to the particular needs of the time and community. When a new field has opened, it has been ready and able to step into that field.

CAUSES OF THE GROWTH OF TRUST COMPANIES.

Regarding the causes of growth of trust companies, the easiest thing to say is also probably the truest-that they are found in the tendencies of our age and nation. The trust company marks not a revolution, but an evolution in our methods of handling financial matters, and we cannot understand its development without taking into account the great changes which our civilization is undergoing. There is, to begin with, the accumulation of individual wealth-the increase in the number of persons and families having large interests to care for. This is not peculiar to the United States, but the general conditions which the holder of wealth has to meet here are quite different from those of the older countries of Europe, and make it of advantage to find other means than those used in Europe for the care and investment of great estates. A still more important influence has been the tremendous increase in corporate wealth, both in number of corporations and in the amounts under their

Here are phenomena that are peculiar to the United States, and peculiar to this age. Nothing like the huge corporations formed in recent years in the United States has ever been known before since history began. To care for these institutions some special agency was need

ed. The trust company proved equal to the emergency. Says one writer: "Without their (the trust companies') agency some of the transactions in modern corporate business would be both cumbersome and difficult. For the success of schemes of reorganization of railroad interests and the financing of vast industrial consolidations, their intervention has grown to be at least an invaluable convenience, if not altogether a necessity.'

1160

Coincident with this tendency to great consolidations-whether as result or as cause will not be discussed here-is the growing recognition among all classes of people of the value of associated effort. Here again the trust company finds itself in harmony with the times. It is an intermediary between great enterprises and the group of individuals who constitute its customers. It takes the amounts, large or small, contributed by the latter, in trust; and the result is a large amount which it can invest in any corporate undertaking to the mutual advantage of all concerned. The political economist will not fail to see here an important service to the community. Surplus funds, useless in small amounts, are gathered together and made to do service in enterprises that benefit the whole people. At the same time, the profits go to those who furnish the capital. The trust company is emphatically an institution of the people. As one writer has pointed out, it enables us to reap most of the advantages claimed for community of ownership, without the dangers that would come with the systems proposed by dogmatists.61

ADVANTAGES OF THE TRUST COMPANY FORM OF ORGANIZATION.

Turning to the specific causes of growth of trust companies as compared with other financial institutions, various writers have pointed out the advantages which the trust company has over its competitors.62 As compared with National banks, and with some State banks, it usually escapes with less taxation. It attracts deposits by paying interest on them. A third cause, and in the writer's opinion by far the most important one in most communities, lies in the wide range of powers which the trust company may exercise. In most States it may do all of the things that an ordinary bank may do, except issue notes; and it performs numerous duties that other banks may not undertake. These wide powers attract customers. It is a distinct convenience to most people to have all of their financial business attended to under one roof. The trust company will not only care for their banking business, but will also receive their valuables for safe-keeping, care for their property, manage their estates temporarily or permanently, make investments for them, give financial and legal advice, aid in the preparation of wills and execute the same after the decease of the customer.

60 Bankers Magazine, Vol. LX. p. 272.

61 Article on "The Trust Company," by Charles W. Stevenson, in "The Bankers' Monthly." Sept., 1903, p. 191. Articles by the same writer in "The Bankers' Monthly" for July, August and October, 1903, treat this phase of the subject at some length.

62 See Bankers Magazine, Vol. XLIII., p. 722, and Vol. LVIII., p. 505.

THE

CHAPTER II.

THE FUNCTIONS OF TRUST COMPANIES.

HE trust company of today performs a great variety of functions, some of which are peculiar to itself, while many are undertaken by other financial institutions. The most distinctive function of the trust company is undoubtedly that of acting as trustee for various purposes. Historically, this was the first kind of business, aside from insurance, that trust companies were authorized to undertake, and the legislation of those States that have laws on the subject indicates that the lawmakers had in mind such business as affording the essential reason for the chartering of these companies. With hardly an exception, the granting of other powers seems to have been intended by the framers of the laws as merely incidental to or helpful in the carrying out of duties as trustee.

The same intention is evident in the name "trust company"-i. e., a company organized to accept and execute trusts. Webster defines a trust as "something committed to a person's care for use or management, and for which an account must be rendered." Blackstone defines it as meaning, in law, "an estate devised or granted in confidence that the devisee or grantee shall convey it, or dispose of the profits, at the will of or for the benefit of another; an estate held for the use of another." A trustee is a person or corporation to whom a trust is committed. With this in mind, it is not difficult to understand the theory of the trust company-simply corporation empowered to undertake those special trusts of a business nature that men are apt to commit to others. This is the original and essential mission of the trust company.

Experience has demonstrated, however, that for the proper execution of such trusts the company is under the necessity of carrying on other lines of business which increase its usefulness as a trustee. Thus one function after another has been added, until today the trust company undertakes a great number and variety of duties which justify the descriptive name that has been applied to it of "the department store of finance."

Because of this diversity of functions, trust companies usually carry on their work in departments, the most common division being a threefold one-into banking, trust and safe-deposit departments. Often the banking department is subdivided into the savings and the commercial banking departments, and the trust department into two parts, of which one is devoted to trust business for corporations, and the other to trust business for individuals. The largest companies frequently have other departments than these, sometimes because the volume of business makes a further division advantageous, and sometimes because other lines of business are included. Among the other departments sometimes found are

[ocr errors]

the bond (or investment) department; the mortgage department; the transfer (or registration) department; the real-estate department; the reorganization department; the title-insurance and the fidelity insurance departments. Most companies make some special provisions for women, and some have a special woman's department.

If the word trustee be taken in its widest meaning, the greater part of the functions of the trust company might be included in a description of its duties as trustee. There are certain forms of trustee work, however, which occur so frequently that they have come to be referred to by special names, and it will be convenient to consider the various functions in the following groups:

Business as trustee or agent for individuals, under private agreement.
Probate business.

Investment business.

Real estate business.

Insolvency business.

Business as trustee or agent for corporations.

Business as transfer agent and registrar for corporations.

Corporation reorganization and financing.

Fidelity insurance and title insurance.

Safe-deposit business.

Savings and banking business.

Miscellaneous.

NATURE AND VARIETY OF INDIVIDUAL TRUSTS.

The number and variety of trusts undertaken for individuals under private agreement are very great, and new forms of such trusts are being constantly created. They come from many different classes of people from active business men who have some special matters that they do not care to handle for themselves; from teachers, artists, doctors, clergymen, women and others who feel that their inexperience or lack of time makes it wise to shift financial affairs to other shoulders; from persons whose poor health requires that they live in other climates and leave their business cares behind; from absentee property owners; from the aged, either too feeble to attend to active business or willing to take a well-earned rest; from persons planning to spend some time in travel and who must have a responsible agent to look after their affairs while away; and from others who, either from choice or from necessity, wish to avoid the care of their property either temporarily or permanently.

In such cases the trust company takes entire charge of the property, whether real or personal, or both, just as an individual acting in like capacity would do. It collects interest, coupons, dividends, annuities, pensions, and any other form of income, notes, accounts, bonds, mortgages, land contracts, etc.; if part of the property be real estate, it

looks after repairs and improvements, sees that the property is kept rented, keeps up insurance, pays taxes, collects rents; it acts as attorney in fact, executes contracts, leases, deeds, etc. It remits or accumulates the income, reinvests the principal, according to the terms of the con

tract.

Married women place their separate estates in the hands of the company, either giving it the sole management or retaining such degree of control as they see fit.

It often happens that men wish to provide for wife or children or other dependents a fund which shall be beyond the reach of their creditors and safe from any unforeseen calamities that might befall the donor's estate, so that the beneficiaries may be assured of an income in any event. For such purposes they convey sufficient property to the trust company as trustee, with a definite contract as to the disposition to be made of the principal and income of same.

Similar trusts may be created in favor of benevolent or educational institutions or others to whom the donor wishes to give the income only of an endowment, without placing the latter under the control of the beneficiary. The trust company receives such funds, invests or reinvests the same from time to time as it becomes necessary, and applies the income as directed in the deed of trust.

Trusts may be created for the benefit of one making the trust, either subject to his revocation at any time, or beyond his control. The young or inexperienced sometimes inherit estates, and suddenly find themselves in situations needing experience and wisdom beyond that which they possess. Occasionally persons in active business life find themselves disqualified through accident, sickness or other cause from caring for their business, and turn it over to the trust company.

Persons whose incomes are received at long intervals or at uncertain times may arrange with the trust company to have the income paid to them in equal monthly installments. If the security is ample, the company will sometimes make temporary advances if necessary.

Trust companies are sometimes called upon to act as agents for the payment of such regularly recurring items as premiums on insurance, taxes, etc. In some instances they have undertaken to care for burial lots and graves.

Persons who are to be away for a considerable time appoint the company custodian of valuable papers and securities. This function is of much greater importance than mere safe-keeping. While the owner is away, it may be of the greatest importance to get at the papers. Bonds may be called for redemption, the owner may wish to place the securities as collateral for a loan, coupons may become due, and the owner need the money for them.

Some trust companies do a considerable business in the handling of escrows. They act as temporary trustees of papers, money or other property placed in their hands by one party to be given to a second

« AnteriorContinuar »