The trust companies of the United States, in common with banking institutions generally, have been called upon to face new conditions and solve many problems of an unusual character as a result of the far-reaching economic effects of the war in Europe. There has been, indeed, a remarkable quickening of the financial as well as of the commercial pulse of the nation. At the same time we have witnessed a broader consciousness not alone in regard to oversea expansion, but also as to the need of more vigorous and scientific co-operation at home, in business and finance. It is, of course, impossible to predict with any assurance as to how extensive or serious the readjustments will be when peace is finally declared. A study of the returns for the past year would seem, however, to bear out the conclusion that improvement has in it the quality of permanence. If precedent counts for anything, and in view of the lean period from which this country has emerged, the future should be full of promise and greater bounty.

The year 1915 was a notable one for trust companies in more respects than one. The record has emphasized more clearly than ever before the high standard of ability and adherence to sound, conservative methods which characterize the management of trust company units. Despite the severe tests to which nearly all banking and financial institutions were subjected during the first few months following the declaration of war in Europe, the record of trust company solvency remains unimpaired. The trust companies may be truly proud of the fact that with the many billions committed to their care as trustees, executors, guardians and as fiduciaries under both individual and corporation indentures, they have given a maximum of protection. On the other hand, the trust companies of the United States have been able to report a larger volume of new trust business than in any previous year. may be that the uncertainty and anxiety in the public mind, engendered by the great world

It

conflict, has stimulated confidence in trust company ability and administration.

Marked Increase in Trust Department Business It is particularly significant that the year 1915 was remarkable for the exceptionally large number of moderate and even small-sized estates and individual trusts turned over to trust companies. An imposing list might also be presented of the number of wills probated, involving large estates, wherein trust companies were named as trustees and executors. The practice of appointing trust companies as coexecutors or co-trustees, in co-operation with individuals, also seems to be growing in power. All this goes to show that the public is becoming more and more appreciative of the expert services and safety offered by trust companies in estate management. It is worthy of note that a considerable proportion of such new business reported by trust departments is in the form of voluntary or so-called "living trusts" where men prefer to turn over the actual management of their affairs to trained trust company hands, thus permitting them to enjoy the fruits of their industry and successful business careers.

It would be interesting to assemble reliable and fairly complete statistics as to the volume of trust business conducted by trust companies. Pennsylvania is one of the few States where the trust companies are required to publish the total figures as to individual and corporate trust funds. In Philadelphia, for example, the trust companies reported on November 11th, the date of the last official call, trust funds aggregating $918,375,563, an increase of $38,000,000 when compared with the total for November 9, 1914, and a gain of nearly $300,000,000 during the past five years. When we consider that in addition to this large sum the trust companies of Philadelphia alone exercise custody over approximately three billions, face value of corporate trusts, it gives some idea of the vast responsibility of trust company management. Especially in connection with the rehabilitation

and reorganization of corporation and railway finances the trust companies perform services of incalculable value. The past year has been essentially one of readjustment in the financial affairs of many important railroad systems and corporations.

Combined Trust Company Resources

It is of interest to review briefly the growth of trust companies of the United States. On June 30th last 1,777 reporting trust companies held combined banking resources of $6,328,454,028, a gain of $403,474,138 as compared with June 30, 1914. Official returns covering the latter half of 1915 indicate further gains in deposits. From June 30, 1915 to December 31st the deposits of the trust companies of New York City alone increased from $1,509,946,900 to $1,917,834,500. Twenty-one years ago there were only 228 trust companies in this country with resources amounting to $962,000,000. From 1894 to 1903 trust company resources advanced to the aggregate of $2,910,000,000, and on June 30, 1911 there were 1,616 companies with total resources of $5,168,533,205. These figures only partially reflect trust company expansion as they relate specifically to the banking activities, and do not embrace the increasing volume of business transacted by the trust, real estate, safe deposit and other departments.

The "Community Trust" or

Movement

"Foundation

One of the most important developments of the past year, in connection with trust company work, has been the growth of so-called "community trusts" or "foundations." The readers of TRUST COMPANIES Magazine are doubtiess familiar with the scope and purpose of these "community trusts" which have been established thus far in ten cities through the initiative of trust companies. Too much emphasis can hardly be laid upon the influence of these trusts in mobilizing and intelligently directing the charitable, benevolent and educational activities of a community. The rapidity with which the idea, first conceived and applied by Judge F. H. Goff of Cleveland, has spread throughout the country, affords, another testimonial of the confidence placed in trust company management and equipment.

Trust Companies and Federal Reserve System Questions of great importance to the trust companies have claimed the attention of the officers and members of the Executive Committee of the Trust Company Section. On November 16th the Federal Reserve banks completed the first year of their operation. The fact that only 30 State institutions, including eight trust companies, have so far applied for

membership, leads to the conclusion that the Federal Reserve Act must be substantially amended in order to induce a general movement in favor of membership on the part of State banks and trust companies. In other words, the Federal Reserve System has thus far enlisted only about one-third of the combined banking power of the United States. A number of amendments have been suggested to the Federal Reserve Board by the Executive Committee of the Trust Company Section in order to render membership more practical. It will be interesting to see if Congress pays heed to these requirements at this session of Congress. One of the principal requirements is that the rights and privileges of State institutions shall be clearly defined in the Act itself instead of being subject to interpretation and rules promulgated from time to time by the Federal Reserve Board. The trust companies, in accord with State banks, are naturally jealous of the powers which they properly exercise under the charters granted in the respective States. These powers are in many instances justified by local or sectional conditions and should be recognized by Congress in framing amendments. It is also reasonable to assume that State institutions will be strictly within their rights if they prefer to wait until the success and "workable" character of the Federal Reserve System have been more definitely demonstraed. During the first year the operations of the Federal Reserve banks have been largely preliminary, and owing to the extraordinary conditions prevailing in international economic affairs, no real test of the usefulness of this system has been possible. The State banks and trust companies, it may be added, are maintaining an open-minded attitude. They have an equal interest with National banks in creating a National banking and currency system that shall be responsible to seasonable business requirements and remove the evils which have heretofore been largely responsible for recurring periods of depression.

Testing Constitutionality of Section 11,

Paragraph K

Needless to say that trust companies will watch with keen interest the progress of the test suits relating to the grant of trust powers to National banks under the provisions of Section II, paragraph k of the Federal Reserve Act. Such action was invited by certain trust companies, acting independent of the Trust Company Section, in retaining legal counsel and bringing the questions of constitutionality before the courts. The objection to the granting of trust powers to National banks is based primarily on the contention that Congress has

no constitutional right to confer such permissive authority upon the Federal Reserve Board. The functions exercised by trust companies as trustee, executor, administrator and registrar of stocks and bonds deal entirely with property or personal affairs of a purely local character. It is of interest to call attention to the decision recently rendered by the Supreme Court of Illinois in which it is held that the State Auditor was within his rights in refusing to grant a certificate of qualification to the First National Bank of Joliet which had received permission from the Federal Reserve Board to engage in trust business. The court held that such grant is in contravention of the laws of Illinois, and that such delegation of powers is not authorized by the Federal Constitution.

A decision is also expected shortly from the Michigan Supreme Court where the first test suit was brought, by the trust company of Michigan. Practically the same issues are raised in Michigan as in Illinois. Similar suits are to be brought, it is understood, in Pennsylvania and New Jersey. That the question of constitutionality will eventually be brought before the United States Supreme Court, is practically certain. National banks have a common interest with trust companies in the final determination of the issue which will be one of the most important in the history of American jurisprudence, involving the mooted question of "State rights." Although a considerable number of National banks have received permission from the Federal Reserve Board to act in the fiduciary capacities described by Section 11, paragraph k, it is doubtful if many of the banks will actively solicit such business. It is doubtless the part of wisdom to await a final settlement of the question through the United States Supreme Court and thus avoid embarrassments in the event of a finding which would declare the contested paragraph as unconstitutional.

Successful Year for Kings County Trust Co.

Besides paying dividends the Kings County Trust Company, during the past year, added the sum of $154,497 to the account of undivided profits. Capital is $500,000, surplus fund $2,000,000 and total undivided profits $635,213. Deposits also showed a substantial increase of $3,776,000 during the year, making the total $21,728,000. Resources aggregate $24,931,427, including $3,723,523 cash in banks; $1,391,506 cash on hand;, $8,450,396 stocks and bonds, other than New York City and Brooklyn bonds; loans on collateral, demand and time, $6,866,122.

Another Large Estate Confided to Care of Wisconsin Trust Company Following the announcement made in the last issue of TRUST COMPANIES regarding the appointment of the Wisconsin Trust Company of Milwaukee as an executor and trustee of the estate of the late David M. Kneeland valued at over $1,300,000 this trust company has been named as sole executor and trustee under the will of the late Mrs. Lydia Payne, widow of the late Henry C. Payne, former PostmasterGeneral of the United States. This announcement affords additional evidence of the rapidly increasing prestige of trust companies as custodians of estates and as executors.

Under the will of the late Mrs. Lydia Payne the Wisconsin Trust Company, of which Mr. Oliver C. Fuller is president, is appointed as sole executor of the estate and sole trustee of a number of trusts created by the testatrix. The personal property of the estate is valued at over $500,000 in addition to real estate. Beside amounts left directly to beneficiaries there are a number of trust funds. The St. John's Home for Old Ladies receives $5,000 to endow a room in the institution in memory of two relatives and several donations are made for diocesan home and foreign missions. The sum of $100,000 is left to Charles L. Jones, a nephew. Among the trust funds created, of which the Wisconsin Trust Company is trustee, is a $40,000 fund, the income to be paid to a sister, Mrs. Louise Jones; a fund of $40,000, the income of which goes to a niece, Margaret V. Jones; a fund of $40,000, the income going to a brother, Arthur Van Dyke; a fund of $40,000, with income to be credited to a niece, Kathryn Van Dyke and a fund of $10,000 to educate and maintain children of relatives.

Empire Trust Company of New York Has Excellent Year

During the past year the Empire Trust Company of New York removed to elegant new quarters in the Equitable Building, due to the need of larger quarters to meet the demands of expanding business. Deposits increased from $21,554,900 to $31,577,278, with gross resources of $34,525,577. The Empire Trust Company was also enabled to employ its increased funds profitably, judging from an increase in undivided profits from $181,612 to $225,184, after payment of regular dividends, etc. The capital is $1,500,000, surplus on market value $1,150,000. The combined surplus and undivided profits, based on market value, is $1.375,184 as compared with book value of $1,345,196.

It has seemed most surprising to those who have given much thought to the matter that in the face of the very general feeling that there is considerable doubt as to the validity of Section 11-k of the Federal Reserve Act, the Federal Reserve Board should freely, and one might almost say indiscriminately, give permits to National banks to exercise the powers which Congress attempted to authorize by that section of the law.

More astonishing still has been the board's seeming disregard for the opinions of its own legal advisors. Many permits have been granted to banks located in States whose laws in the opinion of the said advisors will be contravened if the banks which have secured the permits attempt to operate under them.

Indiscriminate Granting of Trust Powers a
Menace

It has been impossible to believe that either the Federal Reserve Board or the officers of banks which have applied for and received permits have given any consideration to the possibly serious results of illegal and void acts on their part. It is, therefore, with much interest that the writer is watching for the effect of the decision recently handed down by the Supreme Court of Illinois in the case brought by the First National Bank of Joliet to compel the Auditor of Public Accounts of that State to give it permission to act in trust capacities. The court held that any attempt on the part of a National bank to act in fiduciary capacities would be "in contravention of State or local law,' which is forbidden by Section 11-k of the Federal Reserve Act, and would also be in contravention of the Constitution." Also

that Section 11-k "in so far as it attempted to confer such powers upon National banks, is unconstitutional and void."

Significance of the Illinois Decision

With all the permits granted to Illinois National banks held to be void, and with actions similar to that taken in Illinois pending in several other States, will the board heed the danger signal and slow down, or will it rush ahead hoping that the track may be cleared in some miraculous way before a catastrophe occurs? It will be a catastrophe indeed for the clients of National banks if the latter attempt to operate under permission granted by a body which has no constitutional right to give such permission.

The effect on real estate titles, trusteeships of bond issues, payment of claims, etc., is too apparent to require discussion. It is surely to be hoped that the signal will not be disregarded, and that no more permits will be issued nor any exercise of authority attempted under those already granted until the United States Supreme Court has passed squarely upon the issues raised in the various suits started under instructions from the Executive Committee of the Trust Company Section.

If, however, such a course is not followed, then it is the duty of every trust company man to publicly call attention in his community to the trouble and losses which will ensue if National banks in his State attempt the exercise of trust powers, and its courts follow the same line of reasoning adopted by the Illinois court. There should be no hesitation on account of fear that his motives may be misunderstood.

Administration of Trusts Calls for Expert Service

The proper administration of trust estates requires the services of those trained especially for it. The fact that a man may be a good banker does not necessarily indicate that he is in any way qualified to be executor of your estate or mine. The business of trust companies has grown gradually and its conduct has been very generally surrounded with proper safeguards by the legislatures of the several States. Segregation of assets, proper restrictions as to investments, the requirement that a sufficient amount of securities shall be held by the State to guarantee proper management, and many other details, have been carefully provided for. The careful protection thus given estates, and the capable and efficient way in which they have been administered by trust companies have resulted in a great measure of public confidence in corporate management of trusts. This should not now be jeopardized by admission into the field of another class of

Prevention Testamentary and Other
Litigation at the Source

Prevention of unnecessary litigation, particularly in regard to the interpretation of wills, is a subject in which trust companies are vitally interested. It is gratifying to be able to announce that the New York State Bar Association has taken the initiative in bringing about more effective co-operation among lawyers and business men in this direction through the appointment of a special "Committee on Prevention of Unnecessary Litigation," of which Mr. Daniel S. Remsen of the New York Bar is chairman. In a report submitted by Chairman Remsen at the thirty-ninth annual meeting of the New York State Bar Association held January 14th and 15th distinct. progress is reported and the information is given that the Chamber of Commerce of the State of New York will co-operate with the association through its Committee of Arbitration. It is proposed that the respective committees agree upon a few simple rules for guidance of laymen in the prevention of unnecessary litigation, including the writing of wills which is one of the most prolific sources of legal contests. Another suggestion is that the New York State Bar Association establish, under its auspices, a system of arbitration, whereby lawyers shall act as arbitrators for the settlement of disputes among clients, somewhat along the lines of the method now employed by the Chamber of Commerce.

The capital of Montclair. Trust Company, Montclair, N. J., has been increased from $200,000 to $300,000. Deposits have increased to above $3,000,000.

institutions authorized to conduct the same line of business under the varying "rules and regulations prescribed by the board."

"Enabling" Legislation Should be Opposed Some efforts were made last year to secure the consent of the various States to the exercise of trust powers by National banks and a few of them did grant such permission, under the same restrictions as are placed upon domestic corporations (conditions, by the way, which it would be impossible for National banks to accept under the Federal law).

There will be held during the present year, regular legislative sessions in eleven (11) States, in some of which, at least, it seems certain that efforts will be made to get enabling acts through. The opposition to such ill-considered legislation must be initiated and sustained by those aware of the existing legal situation and alive to the disastrous consequences threatened, and active and determined efforts in the matter are required.

Guardian Trust & Savings Bank of Toledo Enters Federal System

The first State institution to apply for and secure membership in the Fourth Federal Reserve District is the Guardian Trust & Savings Bank of Toledo, Ohio. As a member of the Federal Reserve Bank of Cleveland the Guardian will obtain all the advantages which are bestowed upon member National banks and retains all the banking and trust powers conferred by charter from the State of Ohio. Under the terms of admission designated by the Federal Reserve Board the Guardian of Toledo will maintain its reserves in the Federal Reserve Bank of Cleveland; its loans are subject to the same limitations and regulations as apply to National banks, except that it may continue to make loans secured by real estate mortgages.

The trust companies which have thus far become members of the Federal Reserve system are: The Mercantile Trust Company of St. Louis, Central Trust Company of Illinois, Old Colony Trust Company of Boston, Broadway Trust Company of New York, the Guardian Trust & Savings Bank of Toledo and seyeral smaller institutions.

The Guardian Trust and Savings Bank was established in 1913 and has capital of $200,000; surplus and profits of $212,000, and deposits of nearly $2,000,000. E. H. Cady, formerly connected with the Union National Bank at Cleveland, is president; R. B. Crane, vice-president; Edward G. Kirby, secretary; Harry P. Caves, treasurer, and J. Brenton Taylor, assistant secretary and treasurer. The bank has an exceptionally representative and responsible board of directors.