pecuniary helper to the Rhode Island Hospital, then in its infancy. This company, which was modeled in part after the United States Trust Company, of New York, was given a threefold character by its charter: "First, a bank, with all banking powers except that of issuing a currency; second, a savings institution; third, an incorporated executor, administrator and trustee of the estates of decedents and of the living who might desire to avail of its services." 24 In 1868 were chartered the Brooklyn (N. Y.) Trust Company, which commenced a trust business at once; the Worcester Safe Deposit and Trust Company, of Worcester, Mass., which, however, did not accept any trust until 1881; and the Hartford (Conn.) Trust Company, which did not enter into a trust business until 1899.25 Among other companies chartered in New York during the sixties were the New York Guaranty and Indemnity Company, 1864; the National Trust Company, 1867, and the New York Mercantile and Trust Company, 1868.26 All three have passed out of existence. The Northern Trust Company of Philadelphia was established in 1881, transacting trust business from the start.27 Boston now became interested in the movement, and in 1871 the New England Trust Company, which had been chartered in 1869, began business, receiving its first trust in May of that year.28 The Massachusetts Trust Company, of Boston, chartered in 1870, also began business in 1871, but did not engage actively in the trust business until 1887.29 By 1875, besides other companies in New York, Pennsylvania, Connecticut and Massachusetts, there had begun business the Camden Safe Deposit and Trust Company, of Camden, N. J., which exercised at once its powers to act as executor, administrator, guardian, agent, etc.; The Connecticut Trust and Safe Deposit Company, of Hartford, which at once undertook trust business;29 and the Illinois Trust and Savings Bank, of Chicago, which, though authorized by its charter to accept and execute trusts, did not use such authority until 1888.80 Meantime during the sixties there had come into being a class of institutions whose business is now being taken up very generally by trust companies—namely, the safe-deposit companies. The Safe Deposit and Trust Company, of Baltimore, Md., was organized in 1864 as a safedeposit company only, its trust business being taken on in 1876.31 The Fidelity Trust Company, of Philadelphia, was established in 1866 as the Fidelity Insurance, Trust and Safe Deposit Company. While this company undertook the other lines of business indicated in its title, it made a specialty of the safe-deposit business, and claims to be the 24 Circular issued by the company, giving its history. 25 Letters from officers of the companies. 26 Bankers Magazine, Vol. XXIX, p. 678. 27 Letter from the Treasurer of the company. 28 Letter from the trust officer of the company. 29 Letter from the Secretary of the company. 30 Letter from the Secretary of the company. 31 Letter from the Vice-President of the company. pioneer company in the country in this business.32 The Boston Safe FREEDMAN'S SAVINGS AND TRUST COMPANY. 9135 An account of the companies doing business during this period would be incomplete without reference to the Freedman's Savings and Trust Company, although this was a savings bank rather than a trust company. 32 Letter from the Vice-President of the company. 33 Bankers Magazine, Vol. XXI, p. 316. 34 Ibid., Vol. XXVI, pp. 161 to 164. 35 Ibid., Vol. XXVI, p. 632. 36 Ibid., Vol. XXVII, p. 871. 37 In 1876 a decision rendered by Justice Allen stated that National banks are not authorized to receive articles for safe-keeping, and cannot be held responsible for same. Bankers Magazine, Vol. XXX. pp. 222-229. For an able discussion of other trust company functions undertaken by national banks without legal authority, see Mr. Breckenridge Jones' paper on "The Trust CompanyA Necessity," in Proceedings Trust Company Section. A. B. A., 1908. This institution was established through the efforts of Charles Sumner and others, in 1865, as a measure of philanthropy to aid the negroes in accumulating property for support in their newly-gained state of freedom. For some years its business prospered greatly, and thirty branches were established in the Southern States. In 1870 its charter was amended so as to loosen the restrictions on its investments; and this action, together with the panic of 1873, proved disastrous. The company became insolvent in July, 1874, and its failure was the source of great distress among the poor negroes who had trusted the institution fathered by the Government. The depositors numbered 72,000, scattered over thirteen States. The liabilities at the time of failure were $3,037,560; the amount paid creditors, after a delay of several years, finally amounted to sixty-two per cent. of their claims.38 COMPTROLLER KNOX'S CRITICISM OF SOME OF THE TRUST COMPANIES. Among other companies that suspended during the panic of 1873 were the Brooklyn Trust Company, the Union Trust Company, the National Trust Company, and the Warehouse Security Company, of New York.39 The loose methods pursued by many financial institutions, and the craze for speculation and money-getting, which were largely responsible for the panic, called the attention of the Comptroller of the . Currency to the different kinds of banking organizations. Among these the trust companies did not escape his attention. In his report for 1873-74 the Comptroller (Hon. John J. Knox) says:40 "Trust and loan companies are usually organized, by special State statutes, in the large cities. Their capitals, deposits and business are quite large in amount. Reports are not required, and inadequate when given. For instance, one of the largest of these institutions has published but one report in the year, and that report contains only a statement of its assets, without any mention of the amount due to its depositors, or of any of its liabilities. The Bank Superintendent of New York, in reply to an inquiry in reference to these institutions, says (under the date of July 31, 1873): "The trust companies of New York are peculiarly situated. Some are under the control of the Comptroller of the State; but the great majority of them are under no sort of supervision. * * This class of corporations has multiplied rapidly during the last few years. * * * I am not able to furnish a copy of the charter of any of these companies.' The Comptroller adds that he had received some reports from trust companies, but not enough to publish without making the report "delusive." He had better fortune the following year, and statistics of trust companies are found in the reports from 1875 on. In his report of * 38 Bankers Magazine, Vol. XXIX, p. 936, and Vol. XLII, p. 909; Keyes: History of the Savings Banks of the United States, Vol. II, pp. 558 et seq. 39 "Commercial and Financial Chronicle." July 26 and Aug. 30, 1873. Report of U. S. Comptroller, 1873, p 20. 40 Page XLIII. 1875-76, the Comptroller says that the reports from Philadelphia were furnished cheerfully by the officers of the companies, "although they expressed doubt whether they could properly be classed as banking institutions."41 If they are living now their doubts are probably removed. The Comptroller also says: "Several of the companies state that they hold very large values, amounting to many millions, in trust, which are not the property of the companies, and are not, therefore, returned by them as- deposits proper." The same thing is true to-day, and for this reason statistics of trust companies do not convey a correct idea of the amount of property actually under their control. PROPOSED PUBLIC SUPERVISION OF THE COMPANIES. Agitation to bring the trust companies under some sort of supervision was going on at this time in several States. The Bank Commissioners of Connecticut, in their report for 1872, recommended that instead of the annual returns to the Commissioners then required, there be quarterly reports, and that same be published in the newspapers.42 Such a law was enacted in 1872.5 Connecticut had five trust companies at the beginning of that year. The Superintendent of Banking of New York, in his report of December, 1873, recommended that the trust companies be brought under stricter State supervision. At this time some of them were under no supervision at all, while some reported either to the State Comptroller, the Superintendent, or to a Judge of the Supreme Court. The Superintendent's recommendation was adopted, and the companies were brought under his supervision in 1874. COMPETITION BETWEEN TRUST COMPANIES AND BANKS. Evidences that trust companies were now beginning to attract some attention from the general public, and to cause considerable uneasiness among other classes of bankers, is found also in the increasing number of comments upon them in the financial papers as well as in the Reports of the Comptroller of the Currency. In THE BANKERS MAGAZINE for January, 1874,45 is found this statement regarding "Trust and Loan Companies": "They were intended as repositories for trust funds, for the accumulation of deposits to be loaned on mortgage, and for investments in Government loans; in other words, as savings banks on a large scale. Recently they have been converted into stock-jobbing concerns, apparently for the benefit of stock operators, and in large sums." article refers to the remarks of the Comptroller of the Currency in his Report for 1873 (p. XLIII) already quoted. Two years later (April, 41 Page LX. 42 Bankers Magazine, Vol. XXVII, p. 256. 43 Ibid., Vol. XXVIII, p. 184. 44 Cator, p. 51. 45 Bankers Magazine, Vol. XXVIII, p. 520. 1876), the same magazine has this to say:46 "Recent events have led to some solicitude in regard to trust companies in this State, and the reports of these institutions have been scrutinized with unusual interest." On January 20, 1883, the "Commercial and Financial Chronicle" said:"7 "An important feature in our financial situation is the rapid extent during late years of the business of the trust companies of this State. Not very long ago their position was what their name implies—that is, institutions for safely keeping and managing trust funds. More recently they have been running into a general banking business, and now hold a position not very unlike the joint-stock banks of London, which take deposits on interest, loan them out as best they can, while leaving to the Bank of England the burden of carrying the reserve. In a similar manner the trust companies are dependent upon the reserve of the associated banks, while becoming active competitors for general deposits, very large lenders of funds on collateral securities and the leading buyers of paper in the market. * * If the future growth of these trust companies is to be measured by the past growth, it will not be long before they will carry deposits one-half or two-thirds as large as the banks." Two years later18 the same periodical, referring to the Report of the New York Superintendent of Banking, remarked: "He says the number of trust companies has increased beyond the wants of the State, and a general law will be a benefit, by helping to check their multiplication. In all this the Superintendent only gives expression of the prevailing opinion. Trust companies are needful, but only for certain well-defined purposes; they are misnamed and in some cases misleading when, in the garb of a trust organization, they exercise the powers of a bank.” * STEADY DEVELOPMENT OF THE TRUST COMPANIES. Notwithstanding many such complaints as these, the trust company movement went steadily forward, and encroached more and more upon the field of the regular banks. To do this they had to overcome not only the hostile criticisms of the financial press, but the force of State legislation as well. In Pennsylvania, for example, the amendment to the Corporation Act in 1881,49 forbids trust companies to do a banking business. For many years the question was under discussion, whether Pennsylvania trust companies might legally receive demand deposits. As late as 1898 the Law Editor of THE BANKERS MAGAZINE expressed the opinion that it was not legal for them to do so.50 The companies actually did receive such deposits, however; and in 1900 their right to do so was established by decision of the United States Circuit Court of Pennsyl 46 Ibid., Vol. XXX, p. 777. 47 Vol. XXXVI, p. 917. 48 January 10, 1885. Vol. XL, p. 42. Act 26, sec. 1. |