Omaha daily bee., 1902-04-20
QUESTIONABLE FINANCIAL ExPERi-
MENTC


MENTS.
A leading financial journal calls atten-
ton to the multiplication of national
banks and trust companies which is GO
ing on In the east and expresses the
opinion that il is of doubtful financial
expediency. 1t appears that recently
there has sprung up a number of small
institutions with slender capital and lit
tie prospect of acquiring any command
ing position. Some of these are de-
signed merely to serve the neighborhood
needs of the districts in which they are
situated, but 1t is pointed out that such
a subdivision of banking power is hos
tile to the best interests of banking bus
mess n to safe financial development.
One of the very marked results or in
cldents of the last few years of extraor-
binary prosperity is the unparalleled de-
velopment of the banking institutions
that are called trust companies. Until
recently these companies were deemed
to be simply allies of the national banks,
but it is now a question whether the
relation has not been reversed, so that
the more influential and powerful bank
ing institutions of New York are the
trust companies, with the national banks
as allies, either equal or subordinate.
According to late statistics the trust
companies of New York have nearly
$45, 100000 capital and more than $780,
100000 surplus and profits, and they
possess total of nearly $780,
100000. They are said to be gaining in
so rapidly that if the same
comparative gain is reported at the end
of this year which it was possible
to report at the end of December last
then these companies will possess by
January l, 1908, nearly $1,000, 100000 of
resources.
1t is chiefly through these companies
that the colossal fotations of industrial
and corporate securities have been made
in the last yea or two. Last year the
trust companies of New York made
loans upon collateral securities aggre-
eating $5OO,OOO,O OO. They carry deposits
upon which interest is paid of about
500, 100000 a deposit line which is rap
idly paralleling that which marks the
boundaries of the deposits in the ma
tionaI banks. One Of the ~peculiarities
of these companies is that they are ac-
customed to carry very little cash on
hand. Their profits are very large, hav-
ing been reported last year at fully 100
per cent upon the capital.
While these financial institutions and
other ventures or experiments have
prospered under the exceptional condi-
tons of the last few years, paying lib
eral dividends and accommodating a sur
plus, the question is how long such ex-
pedients can be maintained. The sort
of business by which the trust compa-
MES have made their great profits in the
last few years, that of floating indus
trial and corporate securities, cannot
last forever. 1t has perhaps already
nearly reached the limit. What will
these companies do when this means of
earning money is no longer available?
And in the possible event of a great
change in business conditions, where
would these companies, or such Of them
as may be carrying a large load of III
dustrial and corporate securities, find
themselves? They may go on smoothly
enough while the prevailing prosperity
continues, but let a radical change come
and disaster would ensue to many of
them, with enormous injury to the fiHan-
cial affairs of the country. This is a
phase of the present situation which is
worthy of serious attention.