Recent compilations based upon direct reports of leading trust companies and from unofficial sources place the grand total of wealth held in trust by trust companies as approximately $35,000,000,000, which is in excess of onefourth the entire wealth of the United States. The 1912 edition of "Trust Companies of the United States" contains the following table of comparative figures, giving the principal items of resources and liabilities as of comparative dates of June 30 since 1908, and which are net of certain eliminated accounts, such as trust department bal ances: Stocks and Bonds... Cash on Hand and in Real Estate, Banking Other Resources. Total.. $895,509,062.66 $1,074,264,718.46 $ 947,470,391.00 $1,155,493,753.83 $1,204,542,538.80 $3,917,442,356.54 $4,610,369,273.59 $4,610,373,111.88 $5,168,533,205.59 $5,490,570,416.85 Total... COMPANIES COMPANIES REPORTING REPORTING REPORTING COMPANIES COMPANIES REPORTING REPORTING $410,792,491.37 $415,427,503.27 $446,168,110.11 $ 441,545,769.04 $ 468,412,792.52 $3,917,442,356.54 $4,610,369,273.59 $4,610,373,111.88 $5,168,533,205.59 $5,490,570,416.85 The volume also contains a digest of State regulations of trust companies as reported by correspondents showing authority as to the conduct of banking business, savings bank business, discounting of paper, purchase of paper, guaranteeing of bond issues, title insurance, reserve required and other provisions. Other prefatory pages are devoted to description of the facilities offered by the United States Mortgage & Trust Company, its financial statement of June 29, showing total resources of $76,775,000 and total trust department holdings of $1,673,726,616. A series of half-tone views of the banking quarters and branch offices is also included.. The book contains 442 pages, most of which are devoted to the individual reports of the 1,570 trust companies which made returns, giving principal items of assets and liabilities, dividend rate, date of organization, New York correspondents and complete list of officers and directors. The following introductory comment also appears in the 1912 edition: "The record of trust company achievement has never been more strongly marked by constantly increasing evidences of a rare combination of progressiveness and conservatism than during the year ended June 30, 1912. More and more clearly has it been shown that the trust company's functions and its opportunities are capable of a legitimate expansion unrealized in former years. As a result, the trust companies of the country stand higher today than ever before in public confidence, material resources and usefulness to the communities they serve." PUJOISM AN ABASEMENT OF CONGRESSIONAL POWER ΤΗ HE unfair manner in which the high-priced counsel of the Pujo Congressional Committee is allowed to dominate the so-called "money trust" inquiry at Washington doubtless appeals to that type of fiery citizenship which is habitually opposed to order and economic progress. Certain it is that his methods and the wild projections of the inquiry are repugnant to American conception of fair play and common sense. In fact the Democratic majority of the House of Representatives, which countenances these proceedings, either ignores or fails to appreciate the will of the people, as expressed at the November elections, by permitting such abuse of Congressional power. To those who are familiar with Counsel Samuel Untermyer's record as an apostle of "high finance" it appears ludicrous that the Democratic majority in the House allows itself to become the docile catspaw of a man with an axe to grind.. It is somewhat difficult to reconcile the hope that the Democratic party will give a dignified and conservative account of its stewardship during the next four years with the license permitted the Pujo Committee to spread broadcast through the newspapers the ex-parte and misleading information which is manufactured by its adroit counsel. In this day of adjustment in our economic affairs no fair-minded man will object to a rational inquiry into the methods of stock exchanges, or of large banking and trust company interests in New York and elsewhere. But when facts are willfully distorted, when men who have been ejected from membership in 'exchanges for good cause or have some fancied, chronic grievance against certain interests, are allowed to give their jaundiced testimony, it is an affront to the natural sense of justice of every true American. It requires only a statement of few hard facts to show how utterly futile and harmful is the course of the "money trust" inquiry as at present conducted. Insofar as the inquiry into the methods of control employed by certain New York City trust companies is concerned it is only necessary to state that if any corrective influence is needed it must be exercised through the New York legislature which has the sole power to enact provisions for their conduct. But what is more to the point is the fact that so far the investigation has not disclosed a scintilla of real proof that there exists a "money trust" in the popular acceptation of the term. Mr. J. Pierpont Morgan's frank testimony clearly demonstrated that money monopoly is an impossibility. It would be consistent for the ruling faction in the House of Representatives to consider that over ninety per cent. of the business of this country is conducted with the use of negotiable instruments of credit and that the prosperity of the nation depends upon fostering and protecting the basis of this credit. Providence has blessed the land with bountiful crops, the machinery of business and commerce has been rendered more highly productive than ever before. If credit, which is the ointment and life of trade, is attacked as it has been through such broadsides of misinformation as sent out by the Pujo Committee counsel, who has the self-assurance of a demi-god, then the responsibility rests with the House members of the party which is to direct our national destiny for at least a term of four years to come. CURRENCY REFORM AND THE DEMOCRATIC ADMINISTRATION N his valedictory message to Congress President Taft offers timely and wise suggestions regarding the necessity of revised currency laws, which should not be unpalatable to the Democratic leaders in Congress if they are desirous of approaching and solving the problem from an unbiased and practical standpoint. The President says that a proper currency system is the most crying need of the country; that the solution of the questions involved concerns most immediately the wage-earners and that there is no class in the community whose experience better qualifies them in making suggestions for monetary reform than the bankers and business men. President-elect Wilson, in his campaign speeches, intimated broadly on several occasions that the pending reform bills bore the ear-marks of selfish banking interests supporting these measures. We prefer to entertain the view that the incoming Democratic executive will disavow bias and invite the frank views of all concerned, not only in the consideration of currency reform, but also in connection with tariff policies and the administrative attitude toward corporation development. Currency reform legislation will not be seriously attempted either at the present or the extra session of Congress. It appears very probable, however, that this will be the foremost issue at the first regular session of the new Congress next winter as soon as the tariff schedules are fixed according to Democratic policies. There is even a grain of assurance in the announcement that the sub-committee of the House Committee on Banking and Currency will begin hearings in January in connection with drafting a currency reform bill by inviting such eminent authorities as the following: A. B. Hepburn, of the Chase National Bank, New York City, James B. Forgan, of the First National Bank of Chicago, and Festus J. Wade, of St. Louis, representatives of the American Bankers' Association; J. Laurence Laughlin, of Chicago, Paul Warburg, of New York City, J. V. Farwell, representatives of the National Citizens' League and Victor Morawetz, of New York City. Meanwhile every member of Congress, who has no specific remedy of his own, will be besieged by constituents who have worked out on paper the complete cure of all our National currency and banking ills. It is the selfassurance of such men as former Congressman Fowler and his type which may delay the final passage of sound legislation by injecting specious arguments and conclusions. The Democratic leaders will go far toward commanding the confidence of the practical business men of the country by giving more attention to the men who are the head of banks and trust companies and can be depended upon to give aid in an unselfish and enlightened spirit. It is not possible at this stage to venture any statement as to prevailing sentiment among Democratic leaders with respect to the revision of currency and banking laws. But it is significant that there are many influential Democratic Senators and Congressmen who favor the principle of centralization of reserves and the vital features contained in the pending Reserve Association plan. There is also a large contingent inclined toward legalization of the present Clearing House system as a basis for constructive reform. TRUST COMPANIES NORTH AND SOUTH ADVANTAGES OF CLOSER CO-OPERATION Vice-President and Treasurer Atlanta Trust Company, Atlanta, Ga. C APITAL, unlike water, flows uphill. This saying may seem less trite when we remember that interest rates are not always the true measure of earning power. That is to say, an investment bearing nominally ten per cent. may not actually yield ten per cent., because a large portion of the income will have to be set aside as a species of insurance to cover the hazard of losing the principal. True net income can be determined only after making due allowance for the factor of safety; so that a five per cent. investment devoid of speculative risk may in point of fact yield a higher net income than a ten per cent. or twelve per cent. speculation where the hazards of business may cut off or diminish principal or income, either or both, at any time. This principle, dimly recognized by investors, has operated to prevent the influx of capital towards the so-called "new" sections of our country. Capital has been content to flow in the direction of five per cent. net income without deductions for possible loss, rather than nine per cent. nominal rates less a six per cent. sinking fund against contingencies of trade which ordinary prudence would set aside. Owing to the destruction of property and credits in the South during and after the Civil War and the slow recovery afterwards, this section has labored under the stigma of being a "new country" although it should by rights have been classed as the oldest of them all. Be that as it may, the fact remains that capital upon entering the South has up to the present time exacted an abnormally large retainer. In adjusting interest rates to possible risk upon Southern loans, the investor has rather overestimated the hazard-as statistics prove-and has been getting, therefore, a higher net rate than in the West and elsewhere. A certain amount of undeniable prejudice has kept a great deal of money out of the South, and this has operated to stiffen the market for loans, so that lenders operating in this field have reaped the advantage. Some day-probably when the last Great Ledger is balanced and ruled in red-we will understand why the wheat farmer in the Northwest can borrow money on his wheat at five per cent. and six per cent. while the cotton farmer in the South has to pay eight per cent. and more. Surely the cotton is not a less staple commodity than the wheat. Yet such is the case. Perhaps one reason that other sections of the country find capital less dear than in the South is that their finances are better organized; that is to say, they have large financial institutions of their own which act as a steadying influence in the local money market and serve to strengthen the confidence of outside investors. Taking a concrete example: the wheat farmer borrows from the local branch of a big Northwestern trust company. His paper, if rediscounted in New York or abroad, bears the endorsement of that institution and is thus rated as a prime banker's bill, commanding the lowest current discount. After yielding a fair profit to the trust company, the farmer is still able to get his money at a comparatively low figure. Now on the other hand, take the case of the Southern farmer. He borrows from a small local bank. Nine times out of ten the local bank is a big borrower in New York. But, owing to the smallness of the concern it is unable to get a very close rate in the money centers and foreign connections are impossible. The ratio of overhead expense is also larger than in the trust company above referred to and the farmer pays the difference. The South is just beginning to awaken to the need of more and larger trust companies. Not merely in the purchase of commercial bills of exchange—which, after all, is only a secondary function of the trust company proper-but in the finding of permanent capital and long time loans for the upbuilding of Southern industries, is the trust company a truly indispensable affair. This does not mean that trust companies are to assume the rôle of promoters. The legitimate promoter is a highly important adjunct to our modern financial system; but while the trust company may lend financial assistance to him and his associates upon proper security, it should not be found standing in his shoes. But we do mean that the trust company is indispensable for purposes of investigating, organizing, co-ordinating, and properly safeguarding, the industrial and public utility enterprises of any community. When these enterprises have been thus rounded out and solidly financed, the securities issued against them will inevitably find a ready market in the older centers of capital. But if the original promoters had gone to such centers in the first place with an inchoate scheme, no matter how legitimate at bottom, they would not have obtained a hearing. The field for the modern trust company in the South is, therefore, peculiarly attractive. In New England and the North Atlantic States, opportunity has about run to the end of its tether. Pretty nearly everything worth doing has already been done. So much so, that when a Boston banker is approached with glittering promises of a new enterprise or business combination, and the situs of it is less than five hundred miles off, he skeptically inquires: "Well, if this is such a good thing, why has nobody done it before?" These questions are never asked in the South or in respect to Southern enterprises. It is an open secret that this section is full of unappropriated opportunities. And the trust companies of the South will take a prominent part in the harvest. SUCCESS OF TRUST COMPANIES IN HANDLING RECEIVERSHIPS One of the most interesting developments in trust company work during the past few years has been the increasing number of court appointments, under which trust companies act as receiver for bankrupt concerns and insolvent corporations. The trust company frequently continues the business of the insolvent institution and places it on a profitable basis. The courts have also come to recognize the fact that trust companies are best equipped to fairly discharge all liabilities and liquidate assets. Among the trust companies which have been exceptionally successful in this work are the Central Trust Company of Illinois, the Union Trust Company of Indianapolis, the Minnesota Loan and Trust Company of Minneapolis and the Detroit Trust Company. The latter company has organized a special department, and has secured the services of experts in various lines of business in handling insolvent and financially embarrassed establishments. |