A corporation chartered under State laws and not amenable to Government control, as in the case of national banks. Trust companies, however, do very much the same business as national banks as regards receiving business deposits, that is, deposits subject to check, but also may receive on storage, or otherwise, securities, money, jewelry, valuable papers, and documents, and property of any kind upon such terms as may be agreed upon, making a charge for the same; may collect and disburse interest or income, if any, upon principal received on deposit, and collect and disburse the principal investments when they become due, and, in general, act as " trustee " for the handling of funds for minors, incompetents, or trusts in general. Trust companies also deal in securities, and receive money upon which interest is allowed, in much the same way as savings banks.
Trust companies, therefore, may fulfil the functions of all other kinds of banking institutions, with the exception of issuing bank bills, as in the case of national banks. In the words of Secretary Shaw, " they are permitted by law to engage in well-nigh every kind of legitimate business appropriate to private citizens or corporations."
These companies have very generally adopted the rule of allowing interest at a low rate, say two or three per cent., on deposits subject to check. It is, perhaps, this fact, as well as the wide scope of their business, which has caused such enormous increase in the resources of trust companies in recent years. These institutions enjoy another advantage not open to national banks in possessing the right to establish branches. It is a growing custom for trust companies to locate branches in different parts of a city. Particularly, by this means, do they reach the woman depositor in the shopping district.
Although the first trust company for the care of trust funds was established in New York as far back as 1822, yet there was no very broad field covered by such institutions until comparatively recent years, for no such company existed in Boston prior to 1871.
1 The Outlook, Sept. 8, 1906.
One reason why it is becoming more customary to appoint a trust company as executor, trustee, guardian, or administrator, is that such a company is looked upon as a permanent institution, and, therefore, not subject to the annoyances or confusions which might arise from death, incapacity, or unwillingness to serve on the part of one or more individuals. One of the great functions performed by these companies is acting as trustee for railroad and other mortgages, as agent for registering and transferring shares of stock, and fiscal agents, in general, for corporations and municipalities.