for delay and personal advantage. Cases do occur in which, over the proceeds of property or possibly over the property itself, controversies arise among bondholders of such a character that the trustee should step aside and let the bondholders settle their own differences; but cases of this kind are exceedingly rare, and instruments should be so drawn as to protect, through the trustee, every individual bondholder upon precisely the same footing, the trustee being an agent for that purpose, and clothed with full power to control all necessary litigation.

Other provisions might be mentioned which are useful, but it has been the aim to name simply those things which may fairly be considered essential for the trust company to insist upon in accepting a trust under a mortgage. Some mortgages provide for a majority, or two-thirds, or three-fourths of the bondholders controlling the action of the trustee in various matters, especially in declaring the principal of the bonds due on default, and requiring the trustee to begin and carry on or discontinue foreclosure proceedings under the mortgage. Such provisions are really of more interest to the bondholders than to the trustee, but it is an entirely reasonable provision to have inserted in the mortgage that some majority of the bonds should be able to control the maturity of the bonds in the event of default, and should have a voice in directing all litigation and proceedings brought by the trustee. Also the rights of the mortgageor and the interests of the various people holding stock in the mortgageor, if it be a corporation, must not be lost sight of by the trustee.

Essentials required by trust companies to be placed in instruments other than mortgages depend upon the character of the trust created. The only safe rule is to have every such instrument prepared or approved by counsel. Provisions which will enable a trust company to have its accounts regularly audited and settled with someone authorized to act on the part of the beneficiaries are useful, so that the trustee may be free to devote its entire attention to carrying out the wishes of the party creating the trust, with the knowledge that its conduct and administration of the trust will never be questioned after having made its regular settlements. It should be the uniform principle of a trust company, with all the essentials guarded and protected, so to conserve and handle every trust, and at such moderate and reasonable compensation, that the profit to the trust company

will come from the regular and increasing business earned by its record.

THE PROPER CONSERVATIVE ATTITUDE OF TRUST COMPANIES TOWARD CORPORATE ENTERPRISES

ADDRESS DELIVERED BY JOHN E. BOURNE, PRESIDENT OF THE COLONIAL TRUST COMPANY, NEW YORK, BEFORE THE AMERICAN BANKERS' ASSOCIATION, at RICHMOND, VA., OCTOBER, 1900.

TRUST companies have had for years relationships with certain corporate enterprises; they have acted as trustees in railroad and other corporation mortgages; as transfer agents and registrars of stocks issued by such corporations; and have performed various functions which, being purely clerical and administrative, call for no discretion in attitude or relationship, which latter consists largely of a proper performance of certain duties. The great industrial development, however, of the past few, and particularly the last two, years has created another field of usefulness and activity for trust companies, and their services have been made use of in bringing into existence certain large corporate enterprises, in some instances new and in other, by far the greater number, the result of the consolidating and joining together of already existing firms and companies. Here the trust company may act as intermediary in various ways: it may become the depositary of stocks and bonds, titles and equities of corporations and firms; the holder of purchase moneys and payer of the same, the collector of subscription moneys and issuer of new securities, under agreements of consolidation; and it performs the various and varying functions incident to each particular case.

Being thus brought into close contact with an organization, it becomes associated in the public mind with its formation, and its relationship with the enterprise is considered an indorsement of the good faith and probity of the organizers of the same. It is therefore of the utmost importance that a trust company should in every case thoroughly satisfy itself on these points, and that it should decline any business connection where these are at all

doubtful; otherwise it will lay itself open to future criticism and will be bound to suffer in standing. No business function should be entertained where the least cloud exists.

A trust company should take the same view of a corporate enterprise that a merchant takes of a customer. The shrewd merchant first satisfies himself of the standing, both financial and moral, of the applicant for his merchandise, and if he is satisfied on both points, he gives him commensurate credit; if he is not satisfied on either of the above points, he will either refuse to open business connections, or will at any rate limit them to a strictly cash basis. The trust company must take the same view of corporate enterprises. If their financial and moral standing is excellent, it can afford to lend them its credit; if it is not so, it should not even deal with them, as the merchant does, on a cash basis; it will save itself embarrassment and criticism by not establishing business connections with them. Being thoroughly satisfied, however, it can serve a corporation in many ways: it can act as its reference (and the reference of a trust company goes a very long way and has a decided influence in the public mind, hence the necessity of being most careful in this direction); it can bring it into contact with capitalists, and it can further its interests legitimately in various directions without in any way becoming sponsor of its ultimate business success. With this it should not concern itself, and it should in no sense ever become the exploiter of any business or the guarantor in any way of its future success. Where any other course is adopted, the very laws of chance will make a trust company at some time or other sponsor for one enterprise out of many that will fail of success or prove disappointing, and this will reflect more seriously on it, and hurt its general standing and reputation more than it has been benefited by the success of the many. Therefore it should not become the exploiter of a corporation's future possible success. This should be made very clear by a thoroughly neutral attitude. A trust company should practically say to the public: "We know the originators of this enterprise; we are satisfied with their ability, responsibility, honesty, and good intentions; as to the possibility of profit in the business, however, that every investor must look into for himself."

The recent industrial movement has brought to the front or

ganizers and promoters of many classes. The responsible, serious one is readily known as such by his affiliations. The irresponsible, obscure one makes up in assurance what he lacks in the more desirable requisites; he secures his clientele by representing himself as more important than he is; he endeavors to secure the co-operation of a trust company by a generosity in prospective which has behind it the ulterior motive of using the company for the purpose of giving him a fictitious credit and standing. I have no doubt all of you are familiar with this character. He has no objection to any charge you propose on an issue of bonds, and considers any figures you may give him for the performance of prospective services perfectly satisfactory. He makes with you a tentative arrangement, which, as he possesses no responsibility, is rather onesided at best, and then you find him using your name freely as being behind him and his particular enterprise. His methods of ingratiation are various, but they have all one purpose, and only one result with regard to yourselves. He is to be shunned.

It therefore seems to me that the proper conservatism of attitude of a trust company toward a corporate institution lies in assuring itself always of the standing of its originators; in not entering into business relationship with other than responsible, respectable parties; in assisting such parties by vouching for them where their standing is assured; and in taking no part in exploiting the profit-earning side of any enterprise. By assuming this course it will carry out the functions which fall to it logically in the present era of industrial development, namely, that of facilitating the formation of reputable corporations. Here, in order to retain the confidence of the public, its functions should end.

In conclusion, permit me to say that in preparing this article I do so with the knowledge that the business of trust companies in various portions of the United States differs materially, and that what may be looked upon as proper functions in one section of the Union may be considered as either too conservative or not conservative enough in some other section. I have the hope, however, that the above conclusions will be acquiesced in by the majority of my brothers in active trust-company service. It seems to me that the position of a trust company must be like that of Cæsar's wifeabove suspicion; it should in itself represent the highest form of

commercial and financial credit, and it can do this only by keeping free from entangling alliances which may provoke criticism and injure its standing in the community of finance.

THE BENEFIT OF A REAL ESTATE DEPARTMENT TO A TRUST COMPANY

ADDRESS DELIVERED BY LORENZO E. ANDERSON, VICE-PRESIDENT OF THE MERCANTILE TRUST COMPANY OF ST. LOUIS, BEFORE THE AMERICAN BANKERS' ASSOCIATION AT WASHINGTON, D. C., OCTOBER 10, 1905.

THE trust company in many states of the Union, on account of its liberal charter, is authorized not only to do a general banking business, but also to do everything or anything else where bonds, stocks, mortgages, or real estate enter into or are part of the transaction; and, from my observation, very few transactions of any magnitude are negotiated without real estate being one of its important factors. Take one of the most important departments of a trust company, namely the trust department. I say "most important," because it is the department where trust in its truest sense should be exemplified, as it has the management of estates for widows and orphans, and it frequently happens that the largest portion of such estates consist of real estate. Then it is that the real-estate department is of inestimable value to the trust company, as every well-equipped real-estate department should have experienced appraisers, salesmen, and rent collectors, of whose integrity and ability there is no question, and the company thus avoids the necessity of seeking outside assistance in the management of the real property belonging to such an estate. It is through the realestate department, in a majority of cases, that it is possible for the trust department to secure the management of such estates, because when a person makes his will, and is possessed of considerable means, his first consideration is to name as executor of his estate some individual or corporation in whom he has the greatest confidence, and the fact that the trust company has managed his realestate affairs satisfactorily and successfully during his life-time. and is thoroughly familiar with all the details of his property, in