TBUST COMPANIES. 500 TRUST COMPANIES. trust companies for loaning purposes has made possible the increase of their deposits, through the making of such loans, at a far more rapid rate than heretofore. Public discussion has converged on these opera- tions, not only because of their magnitude, but because banking deposits maintained by the ti'ust companies have not been guarded in the same way as have those of the banks. In general, there is no restriction in the State laws as to the amount of cash reserve which a trust company must keep against its deposits, the presumption of the law being that trustee business pure and simple was being carried on. The question whether this po- sition was altogether safe from a banking stand- point has been debated with considerable energy, and various reforms or remedies have been sug- gested. In the making of such reforms, whether through private arrangement or through legis- lative act, two difficulties arise, due to difl'er- ences either in the character or practices be- tween the trust companies and the banks. First, the trust companies, though keeping on hand a cash reserve amounting at times to barely 2 per cent, of their deposit funds, nevertheless main- tain on deposit at demand in other institutions an amount bearing a much larger proportion to their own deposit liabilities. On such deposits with other institutions trust companies usually draw 2 per cent, interest. The magnitude of these deposits may be sho'n from the New York trust companj' returns of January 1, 1903. As against their own deposit liabilities of .$734,342,- 837, they then had on hand in cash only $10,493,- 236, but reported also as on deposit with other banks to their credit $128,166,652. The second difficulty in the way of iirbitrary regulation of the trust company reserve fund lies in the fact that not all trust companies do a general banking business, some of them restricting their activities to trustee business of the old-fashioned order. In general, it has been recognized that deposit accounts held in a trustee business as originally contemplated need no more than a nominal cash reserve. The trust companies of New York State may be taken as typical in a study of the problem. The important point to notice in these companies is that the law which created them is acknowl- edged not to have contemplated the doing of business on precisely the lines now followed by many of the institutions. Seventeen trust com- panies in New York State were chartered by special act of the Legislature between 1822 and 1887. In the latter year the general trust com- pany law was passed, which, as subsequently amended, is now the basis of authorization for the business of the 00 subsequently incorporated companies. The purpose of the law, as clearly shown in these various enactments, was to create a class of institutions which in their powers, duties, and responsibilities should be able to act as substitute for the individual trustee. The general trust company law of New York State as it now stands authorizes the companies to perform the following functions : ( 1 ) To act as the fiscal or transfer agent of any State, municipality, body politic, or corporation, etc. (2) To receive deposits of trust moneys, securi- ties, and other personal property from any per- son or corporation, and to loan money on real or personal securities. (3) To lease, hold, purchase. and convey any and all real propertj* necessary in the transaction of its business, or which the purposes of the corporation may require, or which it shall acquire in satisfaction or partial satisfaction of debts. (4) To act as trustee un- der any mortgage bond issued by any municipal- ity, body politic, or corporation. (5) To accept trusts from and execute trusts for married women, in respect to their separate property, and to be their agent in the management of such property. (6) To act under the order or ap- pointment of any court of record as guardian, receiver, or trustee of the estate of minors. ( 7 ) To take, accept, and execute any and all such legal trusts, duties, and powers in regard to the holding, management, and disposition of any estate, real or personal, and the rents and profits thereof, or the sale thereof, as may be granted or confided to it by any court of record, or by any person, corporation, municipality, or other authority. (8) To take, accept, and execute any and all such trusts and powers of whatever na- ture or description as may be conferred upon or intrusted or committed to it by any person or persons, or any body politic, corporation, or other authority. (9) To purchase, invest in, and sell stocks, bills of exchange, bonds and mortgages, and other securities. (10) To be appointed and to accept the appointment of ex- ecutor or of trustee under the last will and testa- ment, or administrator with or without the will annexed, of the estate of any deceased per- son, and to be appointed and to act as the com- mittee of the estates of lunatics, idiots, persons of unsound mind, and habitual drunkards. These functions niiike plain both the nature of the trust company's business as contemplated by the legislators, and its difference from the banking business as conducted by an ordinary deposit bank. It will be observed that the act above quoted does not specifically in any place authorize the trust company to transact a gen- eral deposit banking business. But the statute does not deny such powers, and in section 8 it provides that a company incorporated under the act may accept "any and all such trusts and powers, of whatever nature or description, as may be conferred upon or intrusted or committed to it by any person or persons." This is a suf- ficiently sweeping proviso to cover the doing of banking business in any deposits intrusted to the company by individuals, and on that basis a great part of the trust company business as nowadays imderstood has been built up. It is because of this growth of a business not contemplated in the original authorizing act that the most interesting recent controversy over the trust company business has grown up. In New York State, trust companies which report semi-annually to the State Banking Department showed in 1898 'deposits in trust' of $18.'j.099,- 694: at the opening of 1903 their 'deposits in trust.' which still should have referred to de- posits under the strict purpose of the original act, were given as $205,341,290. On the other hand, what are classed in the reports as 'gen- eral deposits,' referring presumably to the funds of depositors subject to all the rules which gov- ern deposits of individuals in banks, amounted on January 1, 1898. to $198,229,029. but at the opening of 1903 had risen to $529,001,547. It is probable that the classification of deposits as
