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of the new corporation, to the Kankakee stockholders an equivalent amount of bonds of the new concern, and to the Keokuk stockholders 75% preferred and 75% bonus of the common stock of the new enterprise. An intermediary acts as a depository to receive all the outstanding stock of the three companies and make the transfers provided by the contract.

Similarly, if a corporation after failure is to be reorganized in such a way that each bondholder gets 75% bonds and 25% cumulative 6% preferred stock, a depository is needed to make the exchange. In another case an assessment might have to be collected.

An escrow is a deed or other instrument under seal, placed irrevocably by one party in the hands of another party, for delivery to a third party, upon the fulfillment of a certain condition. It is important that the condition imposed be clear and definite so that the trustee may have no doubt as to when it has been satisfied.

179. Probate and insolvency business. The need for specialized and conservative management in investing and safeguarding estates and properties, and the frequent necessity of ready funds to prevent the sacrifice of sound investments, has led the courts and individuals to call upon trust companies and banks with fiduciary powers to take full control, or joint control (when for some reason an individual is required), of probate, involved, or insolvent estates. Under court appointment such corporations may act as (1) administrator, (2) guardian, and (3) receiver or trustee in bankruptcy. The work of assignee is similar to that of receiver, and the work of executor is exactly that of an administrator, the former being appointed by the will of the deceased, and always having a will as a guide. Whether acting as executor or administrator the assets of the deceased are collected, preserved, and after the approval of the court, distributed to the heirs. Either

is discharged from his duties only after a final account is approved. The property of the insane, minors, or any person declared legally incompetent, must be kept on a safe income-producing basis, carefully preserved, and discreetly expended in the interest of the ward. Many estates limit the guardianship of an individual by a trust company to property and require another to have charge of the person. One state fixes the commissions of an executor or trustee as follows: On the first $1000 of the estate, 5%; on the next $10,000 or less, 22%; on all over $11,000, 1%.

When a business becomes insolvent its property under the bankruptcy act may be placed in the hands of a trustee for the benefit of creditors. The property is converted into cash and the proceeds distributed pro rata among the creditors. Whenever a business has some temporary trouble, some dispute among the owners, some charges of fraudulent or incompetent management, or some friction that needs legal adjustment, it may be possible to have a court appoint a receiver whose duties are to operate the business and straighten out all difficulties. If he finds insolvency which he is unable to overcome he can proceed to satisfy the creditors by a reorganization, or by the sale and distribution of the assets, after which he is discharged. In cases of reorganization and advances of funds for the conduct of a receivership a trust company is peculiarly fitted to fulfill the necessary obligations.

180. Care of trust funds. A trustee may be given funds to be used for a definite purpose or he may be given entire control over an estate. In any case trust funds must be kept entirely separate. They can never be used except in the interest of the beneficiary.

The rules of the Federal Reserve Board which are applicable to national banks illustrate this practice.1

1 Regulation F, Series of 1920.

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"Every national bank permitted to act under this section shall establish a separate trust department, and shall place such department under the management of an officer or officers, whose duties shall be prescribed by the board of directors of the bank. The securities and investments held in each trust shall be kept separate and distinct from the securities owned by the bank and separate and distinct one from another. Trust securities and investments shall be placed in the joint custody of two or more officers or other employees designated by the board of directors of the bank and all such officers and employees shall be bonded. Funds received or held in the trust department of a national bank awaiting investment or distribution may be deposited in the commercial department of the bank to the credit of the trust department, provided that the bank first delivers to the trust department, as collateral security, United States bonds, or other readily marketable securities owned by the bank, which collateral security shall at all times be equal in market value to the amount of the funds, so deposited.

"(a) Private trusts. Funds held in trust must be invested in strict accordance with the terms of the will, deed, or other instrument creating the trust. Where the instrument creating the trust contains provisions authorizing the bank, its officers, or its directors to exercise their discretion in the matter of investments, funds held in trust may be invested only in those classes of securities which are approved by the directors of the bank. Where the instrument creating the trust does not specify the character or the class of investments to be made and does not expressly vest in the bank, its officers, or its directors a discretion in the matter of investments, funds held in trust shall be invested in any securities in which corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.

"(b) Court trusts. Except as hereinafter provided a national bank acting as executor, administrator, or in any other fiduciary capacity, under appointment by a court of competent jurisdiction, shall make all investments under an order of that court, and copies of all such orders shall be filed and preserved with the records of the trust department of the bank. If the court by general order vests a discretion in the national bank to invest funds held in trust, or if under the laws of the state in which the bank is located corporate fiduciaries appointed by the court are permitted to exercise such discretion, the national bank so appointed may invest such funds in any securities in which corporate or individual fiduciaries in the state in which the bank is located may lawfully invest.

"All books and records of the trust department shall be kept separate and distinct from other books and records of the bank. All accounts opened shall be so kept as to enable the national bank at any time to furnish information or reports required by the Federal or state authorities, and such books and records shall be open to the inspection of such authorities."

-The trust activi

181. The growth of trust banks. ties of banking institutions have had a remarkable growth in the United States. In twenty-six years the number of trust companies increased from 251 to 2500 and their resources increased from $843,000,000 to $12,000,000,000.2 The causes have been due, on the one hand, to the great material growth of the country in piling up corporate and individual wealth of all descriptions, increasing the complexity of the tasks to be performed, and, on the other hand, to the methods used in banking and trust work. They have been unusually competent, have given to those who desired one roof under which all business of a financial nature could be transacted, and have inaugurated the 2 Bankers Magazine, Vol. CV, p. 993.

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payment of interest on profitable checking accounts. The fiduciary bank is in line with the modern principle of cooperation. It furnishes to those who otherwise could not afford it, especially the small estate, specialized service, and the best legal and financial advice at a small cost.3

It is an intermediary between the most competent business interests of the country and a multitude of estates, securing for the one, funds, and giving to the others, profitable investment. No matter what the work, the strong and well-equipped trust bank has one or several persons among its trained and experienced staff, especially fitted for the task. The greater the skill, the greater the responsibility, as the law requires the best possible service. Its officers, always at work and always to be found, are paid to do this work and nothing else; it is not a side line, or a duty to a friend from which it might like to be relieved. Its work is subject to court supervision whenever an individual would be under the jurisdiction of the court, and in addition all its affairs are regularly subject to the supervision of the state or nation. Its capital which must be kept intact and its surplus are ever available as an insurance against faults. Its service is permanent, neither ending nor being crippled by the death of a single person.

3 The Committee on Standardization of Forms and Charges of the Trust Company section of the American Bankers Association published in 1919 a schedule of trust company charges.