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Mr. Warner, but will present a copy as used by the clearinghouse association of New York:

TWENTY THOUSAND DOLLARS.

No.

$20,000.

LOAN COMMITTEE OF THE NEW YORK CLEARING-
HOUSE ASSOCIATION.

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has

THIS CERTIFICATE, that the

deposited with this Committee, securities in accordance with the proceedings of a Meeting of the Association, held June 15th, 1893, upon which this Certificate is issued. This Certificate for the sum of TWENTY THOUSAND DOLLARS, from any will be received in payment of balances at the Clearing-house Member of the Clearing-House Association.

On the surrender of this certificate by the depositing bank above named, the Committee will endorse the amount as a payment on the obligation of said Bank, held by them, and surrender a proportionate share of the collateral securities held therefor.

$20,000.

Committee.

Other devices in similar character to the clearing-house certificate, were used during the currency famine of 1893, such as certified checks, pay checks, due-bills, etc.

It is conclusive from the facts presented by Mr. De Witt Warner, that the National banking system, during a severe money stringency, is not clothed with the power to provide in such emergencies, the necessary circulation, its elastic power, such as it possesses, is frequently withdrawn. By the use of conservative language, it may be said that the system at such times is powerless to meet the emergency. Therefore, the clearing-house under its implied power, it has been found, may provide for and issue clearing-house certificates.

They do not circulate as money, but the effect is practically the same. They add to the volume of currency, to the sum or amount which, in their absence, would be required in cash. to make the settlements between clearing-house banks.

While the purpose of the clearing-house, as stated, was not originally organized or intended to be put to such use through its implied or incidental power, in the issuing by it of such certificates, however, by the use of such means, the currency is expanded to aid the circulating medium required by the country in extreme financial depressions.

The issuing of such certificates are recognized as clearly within the law. They are intended to be used only as instruments for settlement of balances between banks that are members of the clearing-house.

The issue and circulation of the instrument is limited between the parties. They are not intended to circulate as money, and therefore, as previously stated, cannot be construed to be in violation of the constitution relating to the issuing of instruments as bills of credit and intended to circulate as money.

In a review of the usefulness and powers of the clearinghouse, it is found to be a great convenience to banks in making settlements between them.

It may also receive from a member bank, securities; and upon such securities make advancements to aid it during times of depression.

As an organization through its committee, it may enforce collection upon such securities where they have passed into the clearing-house for value, and the debtor as against the bank depositing the same, has no right of set-off.

It may also issue clearing-house certificates as settlements for balances found to be due between its members, and they may be used between the bank as a payment in the place of cash.

Banks as organizations may greatly enlarge their usefulness to each other and the public in general by urging all banking associations, where conveniently located, to become members, and as such, report their condition monthly to the clearinghouse committee.

CHAPTER XLVII.

TRUST COMPANIES.

§ 357. Distinguished from a bank.

The powers of a trust company are those which are conferred upon it by the statute.

The extent of its powers in business and acts are such only as are specifically granted to it and authorized by the law. It may, when authorized, do the things authorized by its charter; but it has no incidental or implied authority to transact other business.

It is a trustee and is bound by law to the exercise and performance only of such acts as are delegated to it by the expressed and necessarily implied provisions of the law.

It differs from a bank in this, that its deposits are loans to it or trust funds held in trust, and are not subject to check. It has no power to issue its notes for circulation. It cannot deal in exchange, make discounts, issue letters of credit, drafts, or certificates of deposit.

It may receive moneys in trust, and when so received, it must preserve them as trust funds. It may hold the same and accumulate the same at an agreed rate of interest; and may accept and execute all trusts committed to it by persons, corporations, and courts of record; and receive title to real estate or personal estates on trust, which may be created according to the laws of the State; and may also act as agent for corporations in holding, issuing, registering, and transferring stocks and bonds; but its functions and powers are not banks in the strict commercial sense of that word.1

358. Trust companies may have banking powers.

The constitution and laws of the State govern and control this privilege, and where banking privileges are not expressly granted, the business of banking by a trust company cannot be exercised. Many of the States by special provisions of law

1 Mercantile Bank r. New York, 121 U. S. 138.

have enacted statutes authorizing this privilege, granting to a trust company, in connection with its powers as such, the right te conduct a banking business. But this power must be expressly authorized by the statute, if not, the power does not exist by implication. Where an act of the Legislature authorizes the creation of a trust company, and by its provisions confines its powers to be those of executing trusts, and does not in the act authorize a banking business, it has no power to perform such business under an implied authority of law.

The principle of law governing a trustee who accepts a trust, will not permit the trustee to speculate with the trust property; or to retain the profits made by the use of the same. A trustee is compelled by law to account for and pay over to the cestui que trust all profits made by the use of any trust property.

The doctrine is also settled that a trustee cannot become a purchaser at his own sale without special permission or authority given by a court of competent jurisdiction.2

A purchase by a trustee of property for his own benefit is not absolutely void but voidable; and may be confirmed by the parties interested, either directly or by long acquiescence.3

It will be seen that the business of banking and that of a trust company are governed and controlled upon almost directly opposite principles of law. A banker may make profit out of money received upon an open account, and may also buy property at his own sale. He may also issue drafts, certificates of deposit, letters of credit, and discount notes. Where funds are deposited in a commercial bank upon an open account, the bank at once becomes a debtor for the same. While the deposit of funds in a trust company cannot be intermingled with other funds and must be held in trust, neither can they be used for profit, except as may be expressly agreed upon between the parties and as authorized by law.

Where the statute permits a trust company to do a banking business, a provision of law should always be enacted, requiring that a separate set of books should be kept; and no intermingling of the commercial and trust funds should be permitted. The principle of combination or dual authority, allowing a trust

2 Allen v. Gillette, 127 U. S. 589.

3 Hammond . Hopkins, 143 U. S.

company to do a banking business, is inconsistent and as previously stated should not be permitted unless expressly authorized by law.

The question of authority under the constitution and statute, of a trust company organized under the laws of the State of Missouri to do a banking business, is ably and profoundly discussed in the case of State ex. inf. v. Lincoln Trust Co., 144 Mo. 562.

In this case the Lincoln Trust Company was duly incorporated under the acts of the Legislature enacted in 1889 and amendments thereto passed in 1891.

The company claimed the authority under its charter and incidentally under the laws enacted to conduct a banking business in connection with its trust business, and at the time of bringing the action by the Attorney-General in behalf of the people, it was conducting in addition to a trust business a banking business.

The case is a very important one, as it involves the construction of the powers under the act creating and authorizing trust companies; and also distinguishes the business of banking from. that exercised by trust companies.

The general rule as announced by the Supreme Court of the United States, in the case of Thomas v. Railroad, 101 U. S. 71, is as follows: "The powers of corporations, organized under legislative statutes, are such and such only as those statutes confer. Concerning the rule applicable to all statutes, that which is fairly implied is as much granted, as what is expressed, it remains that the character of a corporation is the measure of its power, and that the enumeration of these powers excludes all others." 4

It is held in the case of State ex. inf. v. Lincoln Trust Company, where the statute permitted trust companies to receive money on deposit, and allow interest on the same, that the money might be returned or paid upon check issued; but that the company could go no further, it must confine its privileges to the language of the statute which permitted such companies to receive money on deposit and pay interest on the same.

In the case of Mercantile Bank v. New York, 121 U. S. 138, the court in determining the question of taxation had occasion.

4 Coolidge v. Williams, 4 Mass. 140.

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