TRUST COMPANIES. 501 TRUStS. above is somewhat loose; nevertheless, the state- ment is sufficient to show the enormous growth of the purely banking side of the trust company business. The banking laws of the United States and of the various States provide without excep- tion for the maintenance of a specitied percent- age of deposit funds in cash reserves. This percentage, in national banks, varies from 7 per cent, to 25 per cent, of the total deposit lia- bilities. As the above citation from the trust company act will show, no such restriction has been applied in the case of the trust companies. The question whether the cash deposited with the banks was a legitimate reserve for all purposes has been the bone of contention in controversy on the subject of trust companies. The banks have contended that it is not and that the trust com- panies should be required to maintain in cash an adequate reserve. The trust companies have in general answered that the funds deposited by them with the banks, if they are properly se- cured by the banks' own reserve, should be a sufficient guarantee against any sudden demands by the trust companies' depositors. In the early part of 1902 this controversy became acute. At that time 27 trust companies in Greater New York used by arrangement the facilities of the New York Clearing-house, for the purpose of ex- changing and redeeming checks paid into them. Such checks were delivered by the trust com- pany to a bank specified as its clearing-house agent, and by that agent were properly exchanged in the daily clearings. On April 20, 1902, the New Y'ork Clearing-house adopted the following resolution: "Every institution which hereafter may be granted permission to clear through a member of this association shall be required to keep in its vaults such cash reserve to its de- posits as the clearing-house conunittee may de- termine. The percentage of such reserve, how- ever, is not to exceed that required of banks members of the Clearing-house Association." The rule did not apply to anj' of the numerous trust companies at that time actually using the clearing-house facilities. A year later, on Feb- ruary 8, 1903, the following more drastic reso- lution was adopted by the clearing-house: "Every non-member institution (not a bank re- quired by law to maintain a specified reserve) now or hereafter sending its exchanges through a member of the association shall on and after June 1, 1003, keep in its vaults a cash reserve equal to 5 per cent, of its deposits; and on and after February 1, 1904, such cash reserve shall be at least 7"^'^ per cent, of its deposits, and on and after June 1, 1904, such cash reserve .shall be such percentage as shall from time to time be fixed by the clearing-house committee, but not less than 10 nor more than 15 per cent, of its deposits. The reserve hereby required .shall be an average reserve as against the average de- posits as shown upon its weekly statements." A vigorous controversy arose as to whether the trust companies should submit to this regu- lation. It was pointed out that for many of them the clearing-house facilities were not in- dispensable, and that they could arrange indi- vidually for the redemption of checks paid in to them. On the basis of this reasoning 10 trust companies, including several of the largest in- stitutions of the kind in New York City, formally withdrew from the clearing-house. Those which remained, numbi'ring 17, acceded to the clearing- house rule and began to build up a cash reserve in accordance with its requirements. TRUSTEE. See Tiusr. TRUSTEE PROCESS. A legal process used in JIassaehusetts and several other New England States, corresponding to the garnishee process in use in most jurisdictions. See Attachment and Gaenishme.nt. and consult the authorities there referred to. TRUST FUND DOCTRINE. A theory adopted by the I'nited States courts, to the ef- fect that the capital stock of a corporation ia a trust fund for the payment of its debts. This theory probably originated in the rule that sub- scribers for stock are liable up to the par value of the stock subscribed for by them. The inci- dents of an equitable trust are not applied in case of an insolvent corporation. Any diligent creditor may satisfy his whole claim, even to exhausting the entire assets of the corporation, if he levies execution before the other creditors, and in absence of a statute to the contrary an insolvent corporation may make a preference of creditors in paying debts. If the assets and capital stock were a true trust fund for the benefit of creditors, a court of equity would com- pel an equal distribution of the assets among all the creditors. The term trust fund, therefore, seems an unfortunate misnomer of a ju.st and equitable rule, but no hardship is created there- by. See Equity, and the authorities there re- ferred to. See also Trusts. TRUSTS. The word Trusts in this article is used of large corporations or as.sociations of corporations or of individuals mostly engaged in manufacturing, which possess sufficient power to fix the prices of their products, in part at least, on the principle of monopoly. It does not include railways or combinations of railways, or Trusts in the technically legal sense. Industrial Conditions Leading to Forma- tion OF Trusts. The Trusts are a late develop- ment, since, until late in the nineteenth century, industrial conditions were not favorable for their formation. In earlier times organizations pos- sessing monopolistic power were either created by law or secured their power through the pos- session of some natural advantage, such as the exclusive possession of certain natural resources, as mines, etc., or through the advantage which comes from the exclusive occupancy of positions of advantage in doing their work — railroads, telegra]ihs, etc. In the modern Trust we often find combined with the advantages of great capital and perfected business organization also some of these natural advantages, but they are not the essence of the Trust advantage. The chief causes, from the indiistrial point of view, which have led to the organization of Trusts, are: (1) The existence of competition which was practically ruinous in its nature, brought about in part by the ease of intercourse between persons "in different localities, and by the diffi- culty of withdrawing readily capital once in- vested in fixed plants. Such competition almost of necessity at times will become so fierce that all parties concerned will fail of making any profit. (2) The possibility of saving industrially many of the wastes which come from the com-
