Memphis daily appeal. [volume] (Memphis, Tenn.) 1847-1886, 1883-01-25
MEMPHIS APPEAL
THURSDAY. !: JANUARY %, 1883
fTHETKUsr CeMPAEx AND BANKING

The columns of the APPEAL have called
attention to-the rapid extension, of late
years, Of the business Of leading trust COM
Panies, an extension that is remarkable
VIXEN taken in relation with the business Of
the banks. The New York Chronicle has an
article upon the subject, the facts in which
merit the attention of fnancialists. For
merly these companies were institutions for
safely keeping and managing trust funds.
They are now doing general banking BUSH
ness, something like the Joint stock banks Of
London, which take deposits on interest and
loan them out, leaving to the Bank Of En-.
gland the task Of carrying the reserve. So
the trust companies are dependent upon
the reserve of the associated banks. As
active competitors for general deposits
they ere very large lenders OF funds
on collateral securities, and are lead.
ing buyers Of paper in the market.
Adding to the New York City institutions
one at Brooklyn, one at Syracuse and one at
Buffalo, eleven companies had resources TO
the amount of s57, ZIG, 100 in 1874; in 1881,
S125, SS8, 9l3 for fourteen companies, and for
the same fourteen in 1882, s139, 75s, 5S4; the
liabilities each year balancing the figures
given above. Turning now TO the associated
banks, we find their total deposits in 1874 to
be $23S, 100000; 1881, S346, 700, 600; 1882,
$3O6, 600, 900. In 1874 the total amount 60
held by the trust companies was less than
one-sixth OF the total deposits held by the
city banks. Now their deposits are one
third IN excess Of the entire bank holdings.
The city banks in 1882 held about Sal ,O00,-
600 less Of deposits than the year before,
while the trust companies held about ST.
100000 more. That is, the trust company
holdings increased during the year in which,
owing to less activity in trade, the
bank holdings diminished about thirteen
per cent. The trust companies generally
are known to be well managed and above
suspicion, but time may come when they
msy prove source Of weakness 10 the bank
ing system. They carry over one-third Of
the deposits the banks hold, but are required
to keep no reserve, resting upon the banks
for power to meet depositors when time of
disturbed credit comes. There is no dis
quiet at the present time, and the need for
{ legal reserve is only theoretical; therefore
the time is proper one to ask whether
twenty-five cent. on bank depositsis sufficient
for stability through crisis that will in
evitsbly come one day. As their, rate Of
growth increases the trust companies will
'oarry deposits one-half or two-thirds as
large as those of the tanks. Our recent leg
islation has tended to stimulate such
growth, while it encourages the regularly
organized banks by restrictions and bank
burdens, and cultivates every kind of sub.
stitute. The public must have bank
Ing facilities; il the national bank
system ia made SO improbable as to be de-
MED opportunity to expand, less desirsbls
substitutes will spring up, and to cripple the
suostitute will not be cure for the evil. |
The experience Of all countries st all times
shows that certain basis is required in
6nanciai institutions 10 give a FIRM standing
for credit. We see by what has been said
that material change is in process. 1t is
now to be considered how, under this change,
the required basis can be found and put into
operation SO as to insure financial safety
and Be prepared for such trying periods as,
at intervals, paralyze public credit and test
to the utmost the best arranged monetary
institutions.