The income-producing investments made in exchange for their own credit (for deposits and notes) were as follows: Commercial paper. Deposits in other banks on interest (estimated).. Total....... $2,496,751,251 400,000,000 229,639,610 $3,126,390,861 If we may assume that the commercial paper averaged 5 per cent, United States bonds 3 per cent, and interest on deposits in other banks 2 per cent, then the total annual income on these investments would be: As stated before, the bank's income is not confined entirely to sales of its own credit. Besides being an investor, the banker is a merchant and broker-dealing in bullion, coin, bills of exchange, bonds, and securities. He is also an agent for the collection of bills and notes. He may likewise be a trustee. All of these functions, however, have to do with money and credit in their uses as capital-with the financial operations and activities involved in the purchase and sale of goods; out of them all come the gross income of the bank, from which is to be obtained its expenses and profit. The service of the trust company. CHAPTER XIII THE TRUST COMPANY A WELL-ORGANIZED system of credit involves a great many fiduciary relations. It is to give greater certainty and facility to the administration of these that the trust company is organized. To make the more common trust relations concrete, as well as the more common demands for their administration, let us recall the experience of a retired banker. At an advanced age he withdraws from cares and responsibilities of management; he intends to devote the remainder of his life to the comforts of home and the care of his own properties and investments. He has not been long, however, in retirement when an old friend asks him to allow his name to be inserted in his will as executor. He consents. A few months elapse when the probate judge of his district approaches him. An estate has been in his court for several years; the administrator, a son of the deceased, has not pushed the settlement as fast as his position demanded; the other heirs complain not only of delay and waste, but also that the administrator has employed a portion of the assets for his own purposes; on being cited to appear and render an account of his trust, he disclaims misappropriation of funds, but avers that his own business requires such a portion of his time that he can not give the estate the attention which it demands. The judge urges A's acceptance of appointment as administrator to wind up the estate as rapidly as the interests of all parties will permit. Presently another trust is thrust upon him in a manner that he can not refuse it. A neighbor has died, leaving an infant daughter. By will he had appointed A the guardian of his child and the trustee of his estate for her benefit. Decedent held interest in a number of industrial concerns; these must be sold and settled and the proceeds invested in such a way that safe and sure income will be realized for the education and support of the child. It will be years before his ward will come to such an age that she will be competent to make business judgments of her own. In the meantime, if he accepts the trust, he will be held to account for the proper care of the estate as well as of the child. One advantage is found in the administration of these trusts: they all call for the exercise of the same kind of conservative judgment, and they fit well into A's own business-investment. But all in all, he finds himself quite as busy with his new duties as he had been before his retirement; in fact, so fully employed is he in looking after the demands of trusts imposed that his occupation is growing irksome. Such demands, however, increase. The failure of a large private bank brings a further request for his services. The many creditors, as well as the court having the The economies of the trust company. estate in charge, urge his acceptance of appointment as receiver. They point out his special fitness; his acquaintance with the men and business firms involved; his knowledge of the value of properties and securities held. An experience such as his seems indispensable to an equitable settlement. The parties concerned propose to allow him to employ such clerical service as he may wish, if he will but exercise the business judgment necessary to the proper adjustment of their interests. He accepts this trust also, but, in accepting, it becomes necessary for him to open a down-town office where he can be in regular attendance during a few hours each day and give attention and direction to affairs. Though clerical service is competent to give attention to details, an experienced and capable financier must pass judgment on all matters involving discretion. Origin of the trust com It is out of just such situations as this, such increasing demands for the competent management of trusts, that the first trust companies arose. The trust company is primarily an American financial institution. It was in this country that it had its origin. Ours was a new society and one in which business activity was a most prominent feature. In America there were comparatively few men of wealth and ability who belonged to what might be called an intelligent, thrifty, leisure class. In Europe a large proportion of estates were so held, and men found among their fellows those who had the time, intelligence, and financial standing necessary for the safe and successful managing of trusts. In America the conservative, well-established, wealthy class the class whose time and wealth were not involved in the turmoils of trade and the risks of business venture—was so far wanting that some specially created agency to perform these services became necessary to the establishment and maintenance of trust relations. But the necessity that gave birth to the invention provided us with a very superior instrument—a financial institution as far in advance of the old-time personal trustee as the modern machine is ahead of hand labor. pany. necessary. Quoting from the Revised Statutes of New York, the term trust company signifies "any corporation formed for the purpose of taking, accepting, and executing Methods of organization such trusts as may be lawfully committed to it, -Legal steps and acting as trustee in the cases provided by law." To give a more comprehensive notion of the constitution of the trust company and of the care exercised in their formation, the manner of organization in that State may be described: "Thirteen or more persons," says the statute, "may form a corporation to be known as a trust company. Such persons shall, under their hands and seals, execute and acknowledge an organization certificate in 1. The duplicate, which shall specifically state: (1) the name by which the corporation shall be known; (2) the place where its business is to be transacted; (3) the amount of its capital stock and the number of shares into which organization the same is to be divided at least $100,000 certificate. is required for cities containing less than 25,000 inhabitants, $150,000 for cities containing over 25,000 to 100,000 inhabitants, $200,000 for cities containing from 100,000 to 250,000 inhabitants, and $500,000 for cities containing more than 250,000 inhabitants; (4) the name, residence, and business address of each member of the corporation; (5) the term of its existence not exceeding fifty years; (6) the declaration that each member of the corporation will accept the responsibilities and faithfully discharge the duties of a director therein if elected to act as such." 2. Notice of intention to After the acknowledgment of this organization certificate, notice of intention to organize such a trust company must be published at least once each week for four consecutive weeks in a newspaper (to be designaorganize. ted by the superintendent of banks) published in the city or town where the proposed company is to be located. "Such notice is required to set forth the names of the proposed corporators, the name of the proposed corporation, and the location of the same, as set forth in the organization certificate. If there is any trust company or trust companies organized and doing business in such city, a copy of such notice shall also be sent to each trust company so organized and doing business at least fifteen days before the filing of the organization certificate." 3. Filing in office of Superintendent of Banks. Within sixty days after the acknowledgment, one of the duplicate copies of the certificate of organization must be filed in the office of the County Clerk of the county wherein the trust company proposes to locate and do business. The other must be sent to the office of the Superintendent of Banks |