Evening star., 1930-11-30
Business News
in
Retrospect
National Banks Have De-
voted Considerable Effort
to Building Up Their
Trust Business Since Pas
sage of the McFadden
Amendment In 1927.
BY I. A. FLEMING.

Amendment IN 1877.
BY 1. A. FLEMING.
Passage Of the McFadden amendment
in 1927 gave to the national banks the
privilege Of assuming all the functions
of a trust company and the right to
add "and trust company" to the end
of their oficial title. The only limita-
ton was the recognition Of the rights
Of State, such laws governing trust
company'S operation being honored.
Prior to the McFadden amendment
national banks were allowed the same
rights under limited rules and with re-
newalS, etc. But few banks availed
themselves Of the early rights under the
old laws, and with the coming of '27
there were great changes to be met,
great wealth had been gained, mighty
corporations established and many OF
them, many individual producers and
incorporated, closely held industrial
establishments, decided to put the bur-
den of furnishing their capital upon
the public and issued millions of new
common stocks, which later cluttered
the New York market. A veritable rush
Of national institutions to seek a share
of the trust company business followed.
Formerly, the charters Of national
banks expired every 20 years and had
to be renewed. We had an experience In
Washington that demonstrated how one
man might hold up the charter of q
bank. Hence there was no assurance
Of permanency in the matter of han
ding trusts, but this was remedied in
the McFadden amendment, the measure
that gave real impetus to the banking
business under national charter.
There Is q fly in their ointment and
one that they are anxious to get out
Of their way. Reference is made to the
decision of New England Federal JUS
tice that the merger Of trust company
with q national bank did not give the
bank the right to function under wills
and other documents naming the trust
company as trustee and executor, either
or both.
AS stated before the Legislatures Of
each State are being urged to rectify
this matter at their sessions this Win
ter.
Today there are $1,000 trusts, more
or less, being administered by national
banks, and at least $4,500, ,000, 900 in
their care. while they are also trustees
for $12,o00,000, 900 of bonds issued by
shares of the business as time passes
and are working just as hard for the
dollar Of trusts as they ever worked for
the dollar Of deposits. AS real matter
of fact, there Is much more profit in
the former than the latter In these DAYS
when deposits are difncult to put out at
satisfactory rates.
Difficult Job.
The ONCE Of the controller Of the
currency has been made to do nearly
IA n@ ~ I1n
rush Of trust company business to
national banks.
The investment Of the billions Of
trust funds Is one Of the most burden
some tasks that bankers have, one Of
the most thankless, one Of the hardest.
Those who have tried making invest
ments on their own account, and their
name Is legion, will readily recognize
the truth Of the. statement, while thou
sands Of them could not be coaxed to
enter the security field again-they
have not the wherewithal, but trust
company must make good.
Many Of the companies, the very
largest, have worked in harmony in
the selection of their investments, and
in this way brought the combined judg-
ment Of many experts to bear upon
their purchases.
J. w. Pole, controller of the cur
rency, will undoubtedly guard closely
all trust assets and will be especially
watchful for national banks in weak
ened condition, for the right to operate
as trust companies Is broad and many
banks in relatively small sectors have it.
Bank Failures.
Many of the bank failures of today
are among the State institutions that
should have closed their doors a year
ago. Many are small institutions in 10
even conduct business on satisfactory
basis.
No Income Tax Clipping.
Five times within the last nine years
income taxes have been reduced to
the satisfaction of the taxpayer. It
would seem that the clipping process in
so far as income taxes are concerned
has definitely ended. Not only that,
but It would be but natural that the
trend should take the reverse direc-
ton. For the first quarter of the fis-
cal year the chief sources of income
fell off about $4,000 a month, and
the ratio for the second quarter would
be even heavier, as there has been
no betterment in business, especially
In the producing end. With the fiscal
year showing q loss OF at least $780,
900 900, one may judge that Secretary
Mellon will not advocate a cut, but
rather that he may have something
to say regarding an increase.
Congress Is happy when it Is cutting
income taxes, just as the various States
seem to be pleased when finding some
thing that they can put under the
impoSt Of q tax.
Real effort Is being made by the
Treasury Department to increase the
collection of taxes and to secure a
just report in connection with incomes.
Few important statements of incomes
are passed and approved in the two.
year period provided by law, this neces-
sity being obviated by the Treasury in
securing from the taxpayer an agree
ment extending for an Indefinite period.
In the case Of a taxpayer refusing
this consent he Is Immediately plas-
tered with q much heavier tax, for the
burden Of proof Is on the debtor.
Getting after the bootleggers and
the racketeers all over the country is
not undertaken by the Government
through the Treasury Department to
punish law violations but to raise
revenue, and in the aggregate the
penalties for non-returns and taxes due
will make an important contribution
to the Treausry.
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