The sun. [volume] (New York [N.Y.]) 1833-1916, 1903-04-15
Trust Companies and Their Resources

The termination by the Union Trust
Company OF its connection with the New
York Clearing House Association is not
In itself an important event, inasmuch
q q largo number Of the trust companies
OF the city do not at present have that
connection. Some Of these companies.
like tho United States Trust Company
and the New York Life Insurance and
Trust Company, stand, with the Union
Trust Company, in the very front rank
OF the financial institutions of the coun-
try. They have large capital and sur
pluses and enormous deposits. Many
Of them have maintained large reserve
against their deposits for q number OF
years. the Union Trust Company having
kept q reserve Of nearly 10 per cent.
Few. IL any. Of the members OF our local
trust companies are actually members
Of the Clearing House Association. They
clear through banks which are men,
bers Of the association and which stand
sponsor to the association for the checks
and drafts Of the trust companies main
tanning relations with them.
It Ii not exactly proper, therefore,
though it u substantially 50, to speak Of
the withdrawal OF the Union Trust
Company from the Clearing House.
The importance Of the matter lies in the
unsettled nature Of the dispute which has
been going on ever since the first Of the
year between very many Of the trust
companies and the Clearing House over
the rule laid down by the Clearing House
that all the trust companies should keep
In their own vaults comparatively large
reserves against their deposits.
Many Of the trust companies. as we
have said. actually keep reserves. Taken
- a whole, however, they do not keep
such funds on hand, all their money
being deposited in banks. The rule es-
tablished by the Clearing House is that
on and after June all trust companies
using the Clearing House must keep
cash reserve OF S per cent. against their
deposits, q reserve OF ~ per cent. after
Jan. I, 1904, and reserve Of l0per cent.
after June 1, 1904. Thereafter power
b given to the Clearing House Committee
70 increase the reserve kept by trust
companies to Is per cent. Many Of these
companies. the Union Trust Company
n particular, have objected to such
requirements as unfair. on the ground
that inasmuch as the deposits are located
n tho banks at the present time reserve
b actually held against them by the
banks; that is to say, the provision OF the
National Bank act requiring the banks
70 keep a minimum cash reserve Of Is
psr cent. on their deposits compels the
banks to keep reserve against the money
deposited with them by trust companies
TIE same a In the case OF all other de-
podts. Tho answer made by the Clear
ing House Association is that il all Of the
VA ,000, 900 OF trust company deposits
could be actually located in the banks
q this city. q local bank reserve would,
Of course, stand against them, and the
deposits Of the trust companies would
~ covered by the rs per cent. reserve
enforced by the National Bank act;
but, II h declared, the deposits Of the
trust companies are scattered in loans
over the country and perhaps over the
world. and these loans are often 10 placed
that . reserve 10 nowhere held against
them, 20 that il 10 difYicult for the trust
companies to call them in in time OF
stre8. The Clearing House Association
maintains that as an additional measure
Of precsution. tending to check impru-
dent financial operations in general, the
trust companies should themselves keep
In their own vaults a certain minimum
cash reserve.
Innsmuch "A all the institutions con-
cerned In this matter are Of thoroughly
solvent character, many Of them doing 4
strictly fiduciary and old-fashioned trust