resources a liquidity and a responsiveness to passing conditions, the lack of which in our own system all of us have felt on many occasions. This solidarity of operation and of policy, coupled with the system which makes the credit of these institutions equal to cash for operations large and small, and throughout the whole country and all of its dependencies as thoroughly as in the heart of Paris, is a phase of economics demanding our most thoughtful attention.

But at the bottom of the whole fabric of France finance, so democratic in its character, and, in the commercial and industrial sense, exhibiting so largely an unsolicited fiduciary character, stands the Bank of France, itself the very essence of the spirit of which we have spoken. This bank, by all odds the most powerful in the world, and at the same time the most directly subservient to popular necessities, has never, even in the times of war or revolution, refused to administer to the honest requirements of the community; and yet, in spite of its liberality, its losses are always insignificant, never, so far as I have been able to learn, having risen as high as the one hundredth part of one per cent. of its operations, and being, of course, wholly lost to sight in the immense volume of its profits. The source of its security lies always in the unbounded aid given by it to legitimate business and in the confidence it thus inspires, being, in the last analysis and in virtue of its wise generosity, its own clearing house, and so being permitted to offset its obligations against its resources by the simplest processes of bookkeeping, without inconvenient dispersion of funds.

In the same way in which the Crédit Foncier has made itself a voluntary trustee for the long-time operations of the country, the Bank of France has, on its side, made itself a like trustee for the rapid operations of modern commerce, securing directly or indirectly to every worthy trader, however humble, constant and liberal credit, by encouraging the habit of replacing open accounts by acceptances, and thus making each man's bill-case, instead of his ledger, the stronghold of his business. It demands at least two names on every commercial bill, so as to secure the record of a legitimate transaction; but it will discount any good bill that is not less than forty francs, or eight dollars, and does as a matter of fact discount each day in the year, among the numberless trading

documents which pass through its hands, from twenty thousand to thirty thousand inland bills of exchange of which not one exceeds in amount a hundred francs, or twenty dollars. As to loans upon securities, where of course a single name suffices, it will accept any collateral that is essentially solid, whether it represents bonds of the state of Wisconsin, stocks of the city of New York, the obligations of a bank in China, the consols of England or Russia, or the rentes of France. It wishes to give to every Frenchman, so far as wisdom may permit, the facilities necessary for the prosecution of any legitimate business at home or abroad, and to do this in a manner affording the utmost ease consistent with ordinary prudence.

It may seem but little pertinent to my subject that I should speak in so marked a way of an institution which is pre-eminently a bank, and not a trust company; but I do so in order to explain how it happens that other institutions, which from their very nature must do much that is expected of trust companies here, can do it readily and always, and without risk or inconvenience. These other institutions know that in their hour of need they can, with the certainty of prompt response, apply to the Bank of France for any relief they may require, and that the bank itself is safe in granting such relief. But it is not alone its six hundred millions of dollars of metallic reserve, coupled with other resources just as boundless in their way, which give to the Bank of France its wonderful strength, important as its cash and securities are in the estimate of its influence. The secret of its power lies in the fact that it has made itself the trustee of the nation's credit, and that, by perfecting a system which secures instant accommodation on any scale; however large or however small, for every proper transaction of industry, commerce, or finance, it has become the reservoir of the nation's wealth and the adjuster of the nation's accounts, rarely making, or being expected to make, any other output of cash than that which constitutes the small change of the daily life of a great and energetic people.

We have much to learn from our colleagues abroad, and I believe that we are disposed to profit by our opportunities; though young and vigorous peoples, temporarily raised above the neces

sity of close economy, are somewhat prone to believe their own judgment the best that exists.

Some years ago I laid before many of the ablest officers of our banks and trust companies all the ideas which are suggested in this paper and many more of a kindred nature, and offered, with their co-operation, to put them to a test, so far as circumstances might prudently allow; but although I everywhere got a respectful hearing, and sometimes a sympathetic one, I was told that my suggestions were in advance of the times. They may have been; but some of them have, from the sheer force of events, been since carried into effect, and others are daily presenting themselves directly to the consideration of able and experienced students of finance, and will not fail to command attention. Indeed, I am sure that the trend of modern civilization and the ever-growing unity of the human family, commercially as well as socially, will bring us, in respect to the work of both banks and trust companies, to adapt to our new and somewhat unique conditions the plans and expedients which have been envolved from the larger experience, the profounder thought, and, I repeat it advisedly, the more democratic financial procedure, of the older world-a world which, though it may have learned some lessons from us, has taught us, and has still to teach us, many more than we are likely to be able to offer to it for very many years to come.

• INVESTIGATION AND AUDIT OF THE ACCOUNTS OF A TRUST COMPANY

ADDRESS DELIVERED BY A. O. KITTREDGE, C. P. A., OF NEW YORK, BEFORE THE AMERICAN BANKERS' ASSOCIATION, AT NEW ORLEANS, NOVEMBER, 1902.

MODERN Conditions demands regular and systematic investigation and report or audit in all divisions of business. The trust company, which, in the short time that it has been before the public, has been exempt from various rules, should be no exception in this regard.

Trust companies and banks are in the same general class, and in a sense the same business rules would apply to the two. Banks

are systematically examined or audited under provisions of the law, and while trust companies are occasionally examined by representatives of the banking departments of the different states under which they are organized, at the same time regular and complete audits are with them the exception rather than the rule.

Banks, upon the basis of natural selection and long experience, have reached what might be described as uniformity in accounting. That is, the features of their accounting systems are so much alike that the examination of one bank is a fair preliminary study for the examination of various other banks. On the other hand, trust

companies are yet so new that in various directions their accountkeeping is crude. Their methods, if not experimental, are yet in a condition not thoroughly worked out or reduced to definite form. If any excuse were necessary for obtruding upon the attention of this assembly at this time some remarks about the investigation and audit of trust companies, the same is contained in the preceding remarks.

In every modern business venture or organization for business purposes, a very considerable part of the undertaking rests upon the basis of credit and upon the intelligence or care with which its managers conduct the business. Accordingly, in the prospectus of various trust companies, we find paraded at the head of the list from twenty to twenty-five men, who are the directors or trustees of the organization and whose high standing in the community is supposed to give credit to the company with which they are connected.

The public does not stop to think that at best a very small number of men stand for the actual transactions and policy of a company doing business. Such, however, is the case, and the trustees, high minded men as they very generally are, require the services of an expert examiner, from time to time, in order that they may know that those put in immediate charge of the affairs of the company are not mismanaging their trust. On the other hand, the stockholders and the public at large have rights likewise in this regard.

A trust company may be described as a corporation authorized by law to undertake every kind of trustee work, and, in addition to this, to do a general banking and financial business. A trust com

pany has a wider business scope than a bank.

While it can furnish

its customers with every facility which the bank can supply, it can render them a great many services which the safest and best equipped bank in the country cannot. A bank cannot offer its customers the facilities which a trust company offers, because from the special character of its business and its close relation with trade, it has always been hedged around by law with restrictions deemed necessary in case of purely commercial undertakings. Trust companies exemplify enlarged banking powers adapted to the ever growing requirements of modern business. They do not compete with or usurp the places of banks, but in themselves use the banks, while with their transactions they go over and beyond anything for which banks were created.

The functions of a trust company are numerous and far reaching, comprising various matters from the management of estates to ordinary trusteeships, and from a banking department on the one hand to an underwriting syndicate on the other. They include, in addition to ordinary banking, the following powers among others: Acting as trustee under mortgages to secure bond issues; trustee for married women with respect to their separate property; guardian, receiver, or trustee of the estate of minors; executor or trustee under wills; committee of estates of lunatics, idiots, and persons of unsound mind; administrator, trustee, guardian, executor, receiver and assignee of insolvent estates, manager of estates of every kind during the temporary or permanent absence of the owners, or for persons advanced in years, or for persons wishing to place the care and management of their property in the hands. of a capable agent; collection of rents, interest, dividends, etc.; acting as registrar and transfer agent of the capital stock and bonds of corporations; general agent for non-residents and invalids; general agent for foreign municipalities, corporations, etc., for the transaction of approved financial business; the general execution of legal trusts, and many others both general and special.

Trust companies exist under and by virtue of state laws. The laws in the several states do not agree, and some of them are more favorable to trust companies than others. All of them demand reports from the trust companies annually and in some cases more. frequently. In most of the states there is provision for occasional