Trust companies were originally created to act as incorporated trustees, that is, as executors and administrators of estates, as guardians to minors, and as custodians of funds or property held in trust.2 Quite generally, however, they were given additional power more or less closely related to their trust functions, as, for example, life, fidelity, and title insurance, and the granting of annuities. In recent years trust companies have greatly extended the field of their activities, and they now perform a great variety of functions in addition to those of a strictly fiduciary character. Many of them receive deposits other than trust funds, paying interest, like the savings banks, on permanent or "savings accounts," and a lower rate of interest on accounts subject to demand checks. They employ these funds in very much the same ways that commercial banks use theirs, and though they cannot legally "discount' commercial paper they accomplish the same thing by buying it. Thus, the trust company has encroached upon the field of both the savings bank and the commercial bank.
1 See Chapter XVIII (Savings Banks. 145. Functions).
2 See Chapter XIX (Trust Companies. 152. Functions).
Some trust companies confine their activities mainly to the fiduciary or trustee business; others make banking their main business; and some specialize on the financial side. The practice is growing for trust companies to conduct both a trust and a banking business. Where this is the case the two departments are generally kept separate, each having its own records and clerks. Trust companies carry on many financial activities in which commercial banks cannot engage. They make loans on various kinds of property including real estate, and deal in stocks and bonds. Many of the larger trust companies, in common with banks, conduct a safe deposit business. In recent years trust companies have been conspicuous as trustees, registrars and fiscal agents in the organization and reorganization of large corporations, and as receivers for bankrupt or insolvent corporations. They have even acted as promoters of industrial corporations, underwriting their bonds and stocks and holding these securities as an investment.
Because commercial banks, and to a lesser degree trust companies, are more or less limited in the kinds of loans or advances they may legally make, special institutions have arisen to meet this condition. They are designed to meet the need for advances on particular forms of property and less easily realizable property, like land, chattels and merchandise. Of this nature are the agricultural banks of Europe, Egypt and the Philippines, the mortgage banks of Germany, the Credit Foncier of France, and the various types of mortgage, loan and investment companies of this country.
Building and loan associations are designed to enable workingmen to build or buy homes for themselves, the property being mortgaged to the association till the amount advanced is repaid. They are practically cooperative savings banks with this advantage over the ordinary savings institution that the funds are used by the depositors themselves in their own interest, and not loaned out to corporations and other business enterprises.