TRUST COMPANIES. Institutions char tered by the several States of the United States for the purpose of performing, as corporations, the general acts and assuming the genetal re sponsibilities imposed upon individuals under the law of trusts. The trust company in the United States exists in various forms, anti com bines with its trustee business numerous other lines of banking; as, for instance, the private savings bank business in certain States, chiefly in the West; mortgage investment in nearly all States; title guarantee and other insurance; and of recent years a general banking business simi lar in all respects to that of the ordinary deposit bank.
The growth and extension of trust companies in the United States has been one of the most noteworthy incidents in the country's recent financial history. The Comptroller of the Currency, in his annual report summarizing the various banking institutions in the United States, had returns in 1898 from 246 institutions of this class, which number had at the close of 1902 risen to 417. In 1902, according to the same report, the assets of the 417 companies ag gregated $1,983,214,707. On January 1, 1899, there had been incorporated in New York State 49 trust companies, having aggregate resources of $579,205,442. At the opening of 1903 there were 77 institutions in existence, with total as sets of $1,039,956.625. On January 1, 1898. the deposits of the New York trust companies aggre gated $383,328,724. At the opening of 1003 their total was $734,342,837. The loan account, which amounted at the opening of 1898 to $261, 765,000, had risen at the opening of 1903 to $597,194.389. At the opening of 1898 invest ments by trust companies in stocks aggregated in New York State $113.525.797; at the opening of 1903 they had very nearly doubled, rising to $219,378,046.
The trust companies have occupied public in terest and discussion chiefly because of the ex ceptional increase of deposits since 1806-97, which is a result partly of the general practice main tained by these companies of offering interest on deposit accounts—a practice very generally aban doned nowadays by banks in the larger cities. The trust companies in New York City offer in terest on all deposits at a rate varying from 2 to 4 per cent., according to the agreement made as
to the permanency of the deposit. Tn addition to the large amount of deposits thus attracted, the immense credit fund in the hands of the 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 trust 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 differ 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 hearing 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 shown from the New Yo•k trust company returns of January 1, 1903. As against their own deposit liabilities of $734,342, S37, 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 arbitrary 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.