subject to its terms, they are treated as thus having imported into the bond all of the relevant provisions of the deed of trust or mortgage so as to accelerate an enforcement of the indebtedness for all purposes through precipitating its maturity with a view of closing up the whole matter at once. The authorities declare in such cases that the bond and mortgage so executed contemporaneously are to be read together and enforced accordingly when it appears, as here, that the bond by apt words refers to the mortgage securing it and calls such provisions into it."

VALIDITY OF BOND ISSUE

In Clavelle vs. Washington Trust Company (226 Fed. 400), the United States Circuit Court of Appeals for the Ninth Circuit has held an issuance of corporate bonds invalid because it was not authorized at a meeting of the board of directors of the issuing corporation. A resolution purporting to authorize the action was sent to the secretary, who signed it and who called two of the other directors, who signed it in the presence of the other and the other of whom signed it without any other director being present. Directors should meet and confer. It is not sufficient that they separately agree to corporate action, unless they have

previously discussed the matter and arrived at a conclusion from an exchange of ideas. Their action should be joint and as a board, not as individuals.

DELIVERY OF TRUST PROPERTY

The deposit of securities in a safety box of a deposit company, under a signed agreement that the box could only be opened by the trustor when accompanied by the trustees, was a sufficient delivery of trust personalty to validate the trust according to the opinion of the Supreme Court of Illinois in Meldahl vs. Wallace (110 N. E. 354).

CONSTRUCTION ON DEED OF TRUST

The terms of a deed of trust were construed against the settlor in Wood vs. Paul (95 Atl. 720). The Supreme Court of Pennsylvania said: "He who created the trust received the full consideration from him who accepted it. The rule governing the construction of deeds should apply here, which is that, since the settlor had it in his power to define exactly what was to be given and what reserved, he shall be held to have intended to give everything not expressly reserved, and the writing will be construed most strongly against him; every influence of law being drawn in favor of his grantee."

About five years ago the Boston Chamber of Commerce made a careful study of the problem of how to encourage and aid the development of manufactures in and around Boston. They decided it would be best to encourage the smaller and lighter forms of manufacture, the so-called "loft industries."

The Chamber had received many applications for financial help either to enable an industry already established to expand or to assist a new one to locate and build up a new enterprise. They felt that this class came outside of the province of ordinary banking and thought something should be done to take care of it. In other words, they felt that there was a class between those served by the banks and those who were obliged to borrow money at ruinously high rates. This was simply an echo of the old feeling that the banks were not taking care of the little fellows, and it was to provide for this supposed need that in 1911 a charter was obtained from the Massachusetts Legislature, and the Industrial Development Company of the Boston Chamber of Commerce was incorporated without capital stock, "for the purpose of assisting financially or otherwise new and existing industries in the Commonwealth."

Its experience, therefore, is of particular interest to the banking fraternity.

Functions of the Company

Under its charter the company was allowed to endorse notes to the extent of $1,000,000 and in order to make the endorsements good, subscriptions or guarantees were obtained from

about 100 persons, firms and corporations in amounts ranging from $1,000 to $10,000. It was decided at first not to use the whole $1,000,000 but begin with $500,000. Each person subscribing to the agreement paid in 10 per cent. in cash so that the company started with $50,000 in cash and pledges for $450,000 which could be called upon at any time. The president was James J. Storrow, of Lee, Higginson & Co., the vice-presidents were Thomas P. Beal, president of the Second National Bank, William A. Gaston, president of the Shawmut National Bank and Daniel G. Wing, president of the First National Bank, and the writer was treas

urer.

Character of Applications for Loans

The Loan Committee was chosen from among the best credit men in the Boston banks. Applications were first submitted to the Committee of the Chamber of Commerce and if passed by them were submitted to the Loan Committee of the corporation and from them they went to the Executive Committee. The company naturally had a great many applications which it could not consider, such as from corporations outside of the State or too far away from Boston or too large or in many cases simply to aid in exploiting a patent.

Somewhat over 1,000 applications were received. The Committee of the Chamber of Commerce finally reported favorably on fiftyeight and of these the Loan Committee authorized thirteen, bearing in mind, of course, that they were passing on credits which they would not have recommended to their banks, as

ex

they felt that it was our duty to tend credit in cases where a bank would not feel warranted in so doing. Of these thirteen, the Executive Committee recommended that eleven should be assisted and their notes aggregating $51,000, in amounts from $1,000 to $15,000, were taken, running at 6 per cent. interest, and were endorsed by the Industrial Development Company and discounted at various banks in the city. A slight commission was charged the applicant. The following lines of business were represented by said applicants: women's clothing, silverware, felt hats, gasoline engines, nautical instruments, automobile tire accessories, boots and shoes, confectionery and lace curtains.

Existing Loan Facilities Are Adequate After a short time it became evident that there did not exist the class of applicants which it was desired to reach. The more we went into the subject, the more it was felt that the banks were thoroughly taking care of all deserving applicants. It was, therefore, voted at the annual meeting in 1913 to transact no further business and to liquidate the company as quickly as possible. Owing to the nature of, the credits, this took some time and it was not until a few months ago that this could be done. The results are interesting. Of the

eleven loans made, amounting to $51,000, six aggregating $21,500 were paid in full and the loss on the balance was $14,962.74 or over fifty per cent. It must be remembered that these eleven loans were selected from a total of fifty-eight passed upon favorably by the first committee after considering a much greater number of applications. It would appear conclusively from this statement that the banks were taking care of all customers who were entitled to credit. This experiment was given a very fair test, was conducted by men amply qualified to carry it out successfully, if such could be done, and a great deal of time and thought was devoted to it.

The Hawaiian Islands are a regularly organized Territory of the United States

Trent Trust Co., Ltd.

Honolulu, Hawaii

Qualified and Equipped to Perform all the Functions of a Trust Company

Correspondence Solicited

Throughout the State of New York various legislative committees have been hunting for new things, tangible and intangible, to be freshly taxed, that additional revenucs may be collected to meet the growing demands resulting from a bad system of spending those revenues. Even, if this search for revenue were conducted under true principles of economics, it would not be easy, justly and fairly, to see that no element escaped its fair share of the burden and naught was too heavily burdened; but, the search seems to be carried on under the irregular genius of mere power, intent that nothing taxable shall elude the grasp of taxation.

The newly created Federal Trade Commission is directing repeated attention to the burdens that are being increasingly imposed upon corporations by the several State governments.. The warning is timely in this month of the opening of our Legislature, and especially so, because of the suggestion that the increased revenue likely to be wanted may be obtained, in part, by changing the system of taxation employed in connection with banks and trust companies.

Legislature Has a Free Hand

New York is one of the States whose constitution contains no restriction upon the taxing power, so that the Legislature has a free hand to tax everything which exists in the State by its own authority, or which is here by its permission. In other words, limitation upon taxes in this State arises not from a written constitution, but only from the great limitation upon all government-the citizens behind the Government. The framers of the Constitution thought this a sufficient security. In imposing a tax the Legislature affects the prop

erty of its constituents; to carry that power to excess would destroy the confidence of the citizen, which would destroy the Government itself. However, National banks, unlike State banks and trust companies, are not wholly dependent upon the just exercise of the taxing power by the State. They are agents of the Federal Government and exist not by the creation of the State, nor by its permission, but independent of it and beyond its control. The States have no power, by taxation or otherwise, to burden the operations of an agency of the general Government.

If the States may tax one instrument the Government employs in the execution of its powers, they might tax all those instruments. They might tax the post and its mail; they might tax the mint and its coinage; they might tax the custom house and its manifests; they might tax the Federal courts and its process. The question is one of Federal supremacy and the declaration of the Constitution, that the Constitution and the laws made in pursuance thereof shall be the supreme law of the land, is not an empty declamation. The effect of this limitation is nothing more and nothing less than that the States may not, by any system, tax the personal property of a National bank, nor may a shareholder be taxed on account of such property, without the consent of Congress.

Power of State to Impose Taxes

The right to tax State banks and trust companies exists independently of any such authority, for the State requires no leave to tax the holdings in its own corporations. The Federal limitation does not deprive the State of the power to tax the real property of a National bank in uniformity with other real property

within the State, because that was a resource for revenue which the State originally possessed before the Constitution and never surrendered.

Prior to the establishment of National banks, State legislatures made many unsuccessful attempts to reach the assets of the United States Bank and its branches. In the Act of 1862, which first established National banks, there was no provision about taxation, but, in the second year of operation, Congress, recognizing the dissatisfaction of the States with the law as it then stood, too generously lifted the tax barrier and seemingly permitted an unfair discrimination in respect to investments in National bank shares. Now, although, the States may not in form levy a tax directly on the bank or its assets, they may tax the shareholders for the value of their shares; and, in valuing the shares for the purposes of taxation, it is not necessary for the States, nor does the State of New York, in actual practice, deduct the value of the United States Government bonds held by the bank, which under every ownership, corporate or individual, except banking, are exempt from taxation; nor, is there any deduction for the value of the real estate of the bank, upon which it pays taxes also, at the regular muni

cipal rate in common with other property

owners.

The theory is that the right of a stockholder in shares of banks is property entirely distinct from the property of the bank itself and the tax on a shareholder personally is not a tax upon the bank itself or its asscts, or upon the shares. The result is that today the property of banks is yielding several times as much tax as similar property of other individual or corporate owners in this State, although the rate is uniform at only one per cent. on the book value of their shares. In spite of this inequality and discrimination, there has not been much open complaint. In the city of New York alone the annual tax collected from bank investments amounts to more than four million dollars. President Purdy, of the Department of Taxes of New York City, has said, that the amount of money thus collected is greater, in proportion to the labor and cost, than from any other source of tax revenue in this State. An attempt to make the tax more discriminating or oppressive than it is, will bring an appeal to Congress or to the courts, on the part of the banks, to remedy such oppression, by correcting the present unfavorable discrimination and will result, not in an increase, but in a large loss of tax revenue.