The trust companies owe their recent rapid growth to several factors. Probably the greatest is the tremendous increase in private and corporate wealth in the last generation. The need for some institutions to care for these large private estates and assist corporate financing promoted the trust company. The trust company has been highly useful in assembling funds for corporate investment, and, in conjunction with investment houses, in directing our industrial development. Its wide range of powers has also attracted customers, for it is able to serve practically every financial need of the private person or corporation; the customer is thus relieved from dealing with different parties and dividing his account. The trust companies have found it possible to pay better rates of interest on deposit balances than have the commercial banks, and this has been a powerful magnet for accounts. As they have been subject to less state legislation, regulation, and taxation, they have had fewer expenses and greater freedom in profit-making.

Another contributory cause of the rapid growth of trust companies was their freedom at one time from regulation as to the minimum reserve kept. They carried practically their whole reserve on deposit with other banks. The accompanying table1 shows that the reserve ranged from 15 to 27 per cent, but that the cash actually kept on hand by the trust companies ran as low as 2 per cent against total deposits, at the time of their most rapid development. After the panic of 1907 the ratio of till money to deposits was raised, both by law and voluntarily from proved business expediency.

1 Herrick, Trust Companies. New York, Bankers Publishing Company, 1915, p. 26.

Relative Growth of Banks and Trust Companies in the United States* (Resources In Millions)

* Reporting to the Comptroller of the Currency at his call, about June 30. These figures for other than national banks, particularly in the earlier years, are not exact, for the Comptroller had to depend upon voluntary reports and such unofficial sources as he might find.

Counted in with the state banks. Not reported.

Reserves And Cash Actually Kept On Hand By Trust Companies