Newark evening star and Newark advertiser. [volume] (Newark, N.J.) 1909-1916, 1915-12-23
NATIONAL BANKS
BARRED OUT OF
TRUST BUSINESS
Ruling of Illinois Supreme
Court on Section Of Fed
eral Reserve Act.
PRECEDENT SET FOR
BALANCE or COUNTRY
Decision Holds State Rights In
tringed-certificates of Au-
thority Refused.

SPRINGFIELD, ILL.,, Dec. 2S.-The
Illinois Supreme Court yesterday, in
the first decision on the question ever
given in the United States. declared
that part of the Federal reserve act,
oy which Congress attempted to con-
Ter power on national banks to act as
trustees, administrators and regis
tnars of stocks and bonds so far as it
relates to each individual State, is
unconstitutional and void. The de-
cision, which Attorney General Lucey
and others say will set a precedent
for other States, was delivered by the
court in the mandamus suit of the
First National Bank of Joliet against
James j. Brady. State auditor.
The court held in it's decision that
the State auditor was justified in re-
fusing national bank a certificate of
authority to act as trustee, admins
traitor or executor under the Illinois
trust act. The bank had brought suit
in mandamus to compel the State aus
ditor. to issue it a certificate Of quail
hcation. The decision of the court
was delivered by Justice Farmer.
Property Rights.
The court in its opinion declares
that the State itself has the right to
enact laws affecting property rights,
and that when Congress attempted
to confer through the Federal re-
serve act on national banks the pow
er to act as trustees, executors, ad-
ministrators and the like, such an
act is In contravention of the laws of
Illinois. The court points out the
fact that the right Of national banks
to act as trustees under the Federal
reserve act was made elective with
the bank and precludes the conclusion
that Congress deemed ii necessary on
any ground that national banks pos
Sess the power to act as such trustees
or administrators.
IF 1t had, the court says. lit is
evident 1t woud not have made the
act elective and permissive."
The bank in the original suit de-
clared it was a member bank Of the
Federal reserve of Chicago and was
permitted to act as trustee, executor.
administrator and registrar Of stocks
and bonds, and applied for certih-
cate of authority to act under the
trust act OF Illinois and ''that Il had
complied with all the provisions of
the Illinois trust act and general in
corporation laws Of Illinois.
Attorneys of Auditor Brady flled a
demurrer to the petition for writ of
mandainus when the state auditor re-
fused to issue certificate OF quail
fications to the bank. The demurrer
set out three reasons why the court
should not issue the writ. The first
was that section IL of the Federal re-
serve act is a delegation of legislative
power by Congress to the Federal Re-
serve Board and in violation of the
United States constitution.
The second reason was that If 1t is
heid it was not q delegation of power,
but a general grant by Congress to
national banks of power to act as
trustees, etc, it Is Unconstitutional
and void for want of power in Con-
zress to grant such franchise to a
national corporation.
The third reason was that 10 per-
nit national banks to act as trustees,
etc, would be in contravention Of the
laws of Illinois,
Not Legislative Grant.
The court declared in answer to the
first argument in the demurrer that
the Federal reserve act was not q
legislative grant, but authorized the
Federal Reserve Board to apply pro-
visions of the act to those banks
which upon application are entitled
to its provisions. 1t was held by the
court that Congress had the authority
To create banking corporations neces-
sary to carry out certain govern
mental functions.
1t was upon the third argument in
the demurrer that Congress could not
grant power to national bank to act
as trustee, in contravention of the
laws of Illinois, that the court sus-
tanned the demurer and denied the
writ of mandamus.