The trust company has an established office and can always be found when needed. The individual is sometimes difficult to locate.

The trust company is always at its place of business every business day of the year. It does not take vacations, does not go away on business trips, does not get sick.

The trust company is organized especially for carrying on such work, which is therefore not secondary to its own business, but is a part of its business. If an individual is competent to carry on such work it is because he has had a successful training in looking after his own affairs, and his success is usually due to the fact that he has given his business his undivided attention. If he undertakes the trust it must be as a thing secondary to his own business, or else he must neglect the latter. Finding that he has not the necessary time to look after details, he may turn them over to an incompetent employee.

Being organized for the work, the trust company has all the necessary equipment-officers and clerks trained for the service, conversant with laws and forms and methods of procedure, vaults for the safe keeping of valuables, correct forms for the keeping of accounts, books to keep track of due-dates of securities and times for the payment of taxes, insurance, premiums, etc. It does not forget.

It is the trust company's business to understand the work. It does not make mistakes due to ignorance, and would be responsible if it did. It has the benefit of a large experience in the work it is undertaking. Very often individual trustees or executors, however honest and faithful, make mistakes that are costly or entirely disastrous.

For the making of investments in the name of the trust, the trust company has advantages which few if any individuals have. The matter is determined by a committee of men trained in such work, and with every facility at their command for keeping in touch with conditions and knowing something of intrinsic values. The extent of the company's operations also enables it to buy on better terms than the individual can.

The trust company gives to the trust, without extra cost in ordinary matters, the benefit of the best legal advice. It unites the advantages of the advice of a number of experienced counselors with the promptness in action of a competent individual.

The trust company is, in most States, subject to examination by State authorities. Its books are always open to inspection by the proper persons. They are intelligible and kept up to date. The individual trustee under private appointment is not usually subject to examination; and when he is, his books are often in a tangle.

The superior facilities of trust companies often enable them to administer trusts with far greater economy than is possible to the individual trustee. Expenses are often much less, while the company is usually in position to secure a greater income for the trust than could the individual. The latter must give a bond, the cost of which must be borne by the estate: while the trust company's assets and special deposit with the State protect the trust without extra cost.

Frequently the interests of the estate-perhaps its very preservation -depend upon temporary advances of money. The trust company is in position to make such advances; few individuals are.

Individuals are often subject to personal prejudices, sympathies or influences which lead them into unwise uses of the property. The trust company is not subject to these things.

The most important consideration of all is that of safety-the absolute safety of the property. Here the advantages offered by the trust company as compared with the individual are unquestioned. Besides the State supervision just referred to, the trust company protects its customers by a large capital and surplus, and in most States by a deposit made with the State officials to guarantee the faithful performance of its trust duties. These things amply insure against loss due to possible dishonesty on the part of the company's officers or employees. The company as an institution cannot possibly be dishonest or unfaithful. It has nothing to gain and everything to lose by such a course. It is to continue in business for a long term of years or perpetually. Its success depends upon its reputation for integrity and faithfulness. At a recent meeting of the Trust Company Section of the American Bankers' Association, it was stated that there had never been a trust fund impaired by a failure of a trust company having control of the fund. Instances of loss to depositors in the banking department there have been, though not many; but the trust funds are so safeguarded that the loss to them is well-nigh impossible. There may be loss to the ordinary creditor of a trust company without in the slightest degree impairing its trust funds, which are kept separate and are not a part of its assets.

On the other hand, losses through individual trustees, executors and administrators have been numerous. How often have the papers told of instances where individuals serving in such capacities have proved unfaithful or fatally incompetent! Men of reputation for unquestioned integrity have been led through speculation or embarrassment in their own affairs to borrow the funds entrusted to them with the full intention of repaying the loan in a few weeks or months, only to find that such restitution is impossible, that they are defaulters, and that the widow and orphan are left penniless through their unfaithfulness. Others, wilfully dishonest, have squandered the funds entrusted to them until every cent was gone and the beneficiaries of the trust were left in dire need. Bonds furnished by these men have often proved worthless; and where ultimately found good, great expense of litigation has been incurred, and the property has been tied up pending settlement of suits.

BUSINESS OF BANKS AND TRUST COMPANIES COMPARed.

Trust companies carry on the banking business, and in the great majority of cases this business constitutes the largest part of their duties. The banking department is usually divided into the department

of commercial accounts, in which the business is similar to that of the National bank with the exception of note issue, and with the exception in many States of discounting paper; and the savings department, in which the business is identical with that of the savings department of the incorporated Savings banks of the central States, and not materially different from that of the mutual Savings banks of the East.

In view of the statement just made, the question naturally arises, "What is the difference between the trust company and the bank?" This question has been discussed to some extent in the periodicals and in the circulars of trust companies. In these discussions are represented diametrically opposite views; namely, that there is no difference between the two institutions, and that there is a wide difference. The variety of opinion arises from the fact that different writers tell of the particular trust companies with which they are familiar, and which differ from each other; and also--and more generally-from the fact that some discuss the question from the theoretical side, while others, disregarding the theory, speak of the actual practice as they find it.

So far as concerns business other than that of the banking department, the foregoing discussion of the functions of trust companies reveals an important difference between these companies and banks. While it is true that some of these functions have been and still are carried on to some extent by some banks, the tendency is to leave this field wholly to trust companies, while many of these functions may not legally be undertaken by banks. Allowing for exceptions, it may be said without fear of contradiction that the functions thus far described are distinctively those of trust companies.

As a matter of theory there are important differences between the business of the banking department of trust companies and that of State and National banks. In theory and in early practice the banking department of the trust company was merely incidental to its other functions, being maintained to care for the funds coming to it in trust. The trust company is a depositary for the inactive and accumulating funds of the community, the bank for the active funds-the funds used in business. It follows that the natural depositor of the bank is the business man, or firm or company, whose funds are continually in use, quickly turned over, and who expects in return, not interest, but accommodation in the way of discounts. The natural depositor of the trust company, on the other hand, is the person or concern whose funds are not in active use, and who wishes a place for the safe-keeping and accumulation of same. A prominent writer on trust company subjects has classified trust depositors, as distinguished from bank depositors, as follows:

64

64 Breckinridge Jones, President of the Mississippi Valley Trust Co., St. Louis. His paper on "The Trust Company Question," delivered before the Missouri Bankers' convention in 1892, and published in pamphlet form by his company, is a masterpiece, and has been widely copied. So far as the writer knows, it was the first published study of the question. The writer acknowledges his indebtedness to this paper for many of the points here given.

"1. The laborer, mechanic, clerk, teacher-all those who work for wages or on salary.

2. The capitalist, the professional man, the married woman who has a separate estate.

3. The business man who wishes to separate his private income or the surplus profits of his business from his general business capital.

4. The corporation, public or private, that is accumulating a sinking fund, or any individual who is husbanding a balance to pay a debt. 5. The executor, administrator, curator, guardian, assignee, receiver, trustee under deed or will or order of court.

In short, all such who wish their daily deposits to draw interest." A study of this list reveals a class of accounts entirely distinct from those handled by the ordinary bank, and a class of accounts, too, for which little provision is made by National banks or by the old-time State banks.

These trust depositors expect from the trust company in return for 'their accounts compensation of quite a different kind from that which the bank depositors expect from their bank. Their moneys are placed in the care of the company for accumulation; they want interest on their funds as well as a safe place to keep them. The ability to withdraw the funds on demand is not of pressing importance to them, and they are often willing to give notice some time in advance of intention to withdraw their deposits.

It results that the trust company is in position to invest its funds in ways quite different from the bank. The funds of the latter must be so placed that they can be quickly recovered to meet the needs of customers, being usually invested in paper that will mature in thirty, sixty or ninety days, or four months at the longest. The trust company can safely make long time loans on collateral or on real estate. Moreover, since the trust company pays in full for the use of its depositors' money by allowing interest on such money, it has no obligation to confine its loans to depositors, but may lend to whomsoever offers the best security and the highest rate; or it may invest its money largely in bonds and stocks. The bank remunerates its depositors by offering them a line of discounts, and hence must reserve its money mainly for loans to such depositors.

The necessity of dividing its loanable funds equitably among its depositors who desire discounts requires the bank to confine its loans to comparatively small amounts, while the trust company is in position to make large loans.

As a matter of theory, then, both as regards the classes of customers whom they serve and as regards the uses of their funds, trust companies and banks occupy distinct fields. They are co-ordinate institutions, each supplementing the work of the other, and both necessary factors in carrying on the financial affairs of the community. There is here not competition, but co-operation.

So much for the theory. In actual practice, the differences between the two classes of institutions are much less marked, and the tendency in many communities is steadily to lessen such differences as do exist. As a matter of fact the trust company of to-day has invaded a portion of the field of the bank, while, on the other hand, the bank is invading at portion of the field of the trust company. Most trust companies seek business accounts, payable on demand by check, offering as inducement interest on satisfactory daily balances. In cases where the law does not forbid, some companies also offer lines of discount. On the part of the banks there is a noticeable tendency in many localities to seek inactive accounts on which interest is allowed. This movement is being taken up by National banks, which in some instances maintain savings depart

ments.

The result is that there are communities in which there are only slight differences between the business done by State banks and that done by the banking departments of trust companies. Both maintain commercial banking and savings departments conducted in the same ways. Their loans and investments are of practically the same character.

In other communities, where most of the banks and trust companies follow the lines of business for which each was theoretically established, there may sometimes be found individual trust companies which do a regular banking business, and individual banks which compete for the dormant accounts that naturally belong to trust companies or Savings banks.

Taking it the country over, it is safe to say that the difference between the average State bank and the banking department of the average. trust company is slight, except in those States where trust companies may not discount commercial paper.65 Such differences as exist usually concern the proportions of the various kinds of business handled, business accounts as a rule forming the larger, and inactive accounts the smaller part of the bank's business, while the reverse is true of the banking department of the trust company.

Where the trust company is forbidden to discount commercial paper, there results, of course, a distinct difference in the business of the two institutions due to such prohibition. In such cases the trust company still handles a large number of business accounts, as many business men either do not need discounts, or have other means of procuring them. In many places the practice has grown of forming working agreements by which groups of banks and trust companies throw business into each others' hands. By this means a given group of financiers is able to handle financial business of any kind. This plan is a recognition at once of the need of both institutions and of essential differences in their functions.

65 This statement is based on a personal study of trust companies in eight of the largest cities, and upon an examination of the business advertised in the circulars of some three hundred representative trust companies located in all parts of the country.