Yorkers are pondering upon these questions, and not infrequently printed remarks are made about the "money Trust." If this expression were heard only in the region of the hundredth meridian its interpretation would be obvious; but within the sacred precincts of Wall Street, such words cannot fail to produce a certain impression. At least they serve to suggest some concluding remarks.

It is sometimes said that the weekly statement of the condition of the New York banks is being manipulated for speculative purposes, and that it can be made favorable or unfavorable, according to the market position of the larger interests in finance. If, for example, it is desired to depress the prices of stocks, it is thought that large sums are withdrawn from the Clearing House banks, in order to reduce the surplus reserves which are commonly accepted as the index of the condition of the money market. This charge is, from the very nature of the case, extremely difficult to prove or disprove. Such transfers of money might certainly be made; but in the absence of positive proof, one cannot assert that they are of frequent occurrence.

Other disagreeable rumors concern discrimination in extending or withdrawing loans by which, it is said, certain concerns that have attempted to compete with some of the trusts have been forced to inevitable ruin. Here, again, decisive proofs are hard to obtain. The withdrawal of bank accommodations has always been a possible means of commercial reprisal, but it is usually conceivable that some other reason exists for the action of the banker. Doubtless the concentration of great power in few hands increases the dangers that may be apprehended from this practice; but up to the present time the evil is probably more potential than the actual.

The question of greatest interest, however, is: How far is the process of concentration to go? If two groups of magnates control to-day nearly one half of the banking capital of New York, what is to prevent them from establishing a practical monopoly of the business? There can be no doubt that money is now held much more tightly than formerly, and it is not strange that the situation has caused some apprehension. In considering the matter it is possible to stay one's judg

ment by recalling the fact that, of all forms of capital, banking capital is absolutely the freest. It is unnecessary for the banker to erect an expensive plant which will be rendered worthless if his competitors are able to drive him out of the business. Provided that care is excercised in making loans, it is possible for any concern to enter or to retire from the field without losing any appreciable portion of its investment. The trouble and expense of incorporating a banking association need not be incurred by any individual or firm that may desire to lend money upon personal or collateral security. No crude materials have to be transported through pipe lines or upon railroads that refuse equal opportunities to all shippers. The post office does not attempt to discriminate between its patrons, and express companies would hardly be so foolish as to hasten the establishment of a parcels post by adopting such a short sighted policy. Moreover, the average small customer, like the average large depositor or borrower, prefers to have personal relations with the banker; and this becomes increasingly difficult as the size of an institution increases. Under such circumstances, the establishment of anything resembling a complete monopoly is quite inconceivable. Even when a government grants special privileges to a central bank, as has been the case in Europe, a vigorous competition still persists. By the side of the Bank of England there has grown up a vast system of private and incorporated banks, and the Bank of France is confronted by such rivals as the Credit Lyonnaise.

But even if complete monopoly is impossible, it does not follow that the prospect is free from all unpleasant features. So large a part of the resources of the New York banks is now controlled by the great alliances that it would be difficult to finance a corporate enterprise of the largest size without the consent of the Morgan or Rockefeller interests. For such a purpose outside capital might possibly be enlisted, but this would probably entail considerable risk and effort; so that, for the present, a few magnates have the situation pretty well in hand. Then, again, it is unfortunate to have the largest banks and their affiliated institutions so closely identified with particular corporate interests. This gives to the great captains of industry almost unlimited control over other people's capi

tal, and enables them to tie up in their own enterprises banking resources that should be available for the use of the community at large. Especially undesirable is it to have life insurance and trust companies drawn so largely into the domain of speculative finance. The general tendency of the times seems to be to confuse the distinction between enterprises that are safe and investments for funds in a fiduciary capacity and ventures that should be undertaken only with capital that is otherwise provided. Underwriting projects in which a profit of two hundred per cent is considered none too large a compensation for the risks assumed, do not furnish a good field for the conservative employment of trust funds. It is in these directions rather than in the menace of a monopoly that the present dangers of the concentration movement are to be found.

The systemization and, within conservative limits, the unification of our banking system offer large opportunities for legitimate enterprise, and contain the possibility of great advantages for the entire country. The analogies furnished by experience of other nations suggest, at any rate, that such developments are likely to occur during the next decade. The joint control of numerous banks will probably lead to what will amount virtually to the growth of branch banking, which has proved so successful wherever it has been tried. Monopoly will not be the result of such a process, if the example of other lands may serve as a guide for our conclusions; rather will it increase the effectiveness with which capital competes with capital in all parts of the United States. But the movement must be guided with great circumspection if political antagonism of the most violent character is not to be aroused; and it must not be directed with a view to the advantage of ulterior industrial interests. At the center of any stable system there must stand large banks of which the independence and the conservatism must be as unquestioned as the power. Without these qualities, mere bigness will be of no avail; and this is the fact that must receive chief emphasis in the consideration of present conditions and tendencies.

THE RISE AND BUSINESS OF THE MODERN

TRUST COMPANY.

BY WILLIAM P. GEST.

[William P. Gest, vice president of the Fidelity Trust company of Philadelphia, is one of the best known trust officials in the country. He has not only a reputation as a practical financier, but he has made a thorough study of the theory of his branch of finance, and has written a number of articles on the theory and operation of trust companies, and also has delivered addresses on these subjects.]

Copyright 1905 by William P. Gest

The economic conditions under which we live must be of interest to all: and particularly when the United States is confronted with a problem unsurpassed for magnitude and interest and for which history affords no precedent-it is the reconciliation of democracy with the modern industrial movement. This problem is year by year moving into a more acute stage, while, on account of the perplexity of its factors and the newness of their character, we search the past in vain for any method of solution. It is no wonder, therefore, that some of our wisest see no solution except retrogression, while many to whom retrogression seems impossible stand aghast to await time's own solution.

Now, our whole economic system in its present development depends on the free employment of individual capital, and of this system the trust company is the newest and most elaborate instrument. It is quite necessary, therefore, for one who wishes to understand the times in which we live to know something of these new and powerful agencies.

Those who decry present conditions under the name of capitalism, as well as those who endeavor to alleviate them, must remember that the development of our industrial system started and is built upon the free movement of capital, and in order to have a convincing knowledge of this it will be of advantage to revert for a moment to the origin of the industrial movement.

What it was that caused the sudden acceleration of industry in England in the last half of the eighteenth century is a question which has not, so far as I know, been analyzed in sufficient detail. That was one of the most singular and portent

ous events in all history. Most of the important arts had already been discovered. Iron, steel and textile fabrics could be made; the possibilities of steam had been foreseen, but all these tremendous powers lay dormant only to dream in Utopian visions of the future. Suddenly all of these power sprang into action. Huxley states this problem in his customary clear and accurate style:

"The middle of the eighteenth century is illustrated by a host of great names in science-English, French, German and Italian-especially in the fields of chemistry, geology and biology; but this deepening and broadening of natural knowledge produced next to no immediate practical benefits. Even if, at this time, Francis Bacon could have returned to the scene of his greatness and of his littleness, he must have regarded the philosophic world which praised and disregarded his precepts with great disfavor. If ghosts are consistent, he would have said, "These people are all wasting their time, just as Gilbert and Kepler and Galileo and my worthy physician Harvey did in my day. Where are the fruits of the restoration of science which I promised? This accumulation of bare knowledge is all very well, but cui bono? Not one of these people is doing what I told him specially to do, and seeking that secret of the cause of forms which will enable men to deal, at will, with matter, and superinduce new natures upon the old foundations'."

Huxley's explanation is that a little later the growth of knowledge beyond imaginable utilitarian ends began to produce some effect upon practical life. This explanation, however, fails to satisfy the economist. He looks for a positive cause, not merely a condition in which the cause may act. Huxley, indeed, has no positive message for the world in economics; his political doctrine being (consistently with his position as a naturalist) an indeterminate expediency. The historian and not the physiologist must discover the cause, and there must evidently be some positive cause. Knowledge is power, but power does not execute itself. Even after an invention is realized in a machine, it remains an experiment until economically excited.

No doubt the full answer to the problem is complicated. There might be found remotely a geographical cause in the