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SOCIALISTIC

TAINT IN POLI

TICS AND LEGISLATION

O stamp out insurrection and Bolshev

Tism in this land it is necessary to sys

tematically oppose with sound American propaganda the propaganda of blind fanatics and flannel-mouthed demagogues. We must get away from the craze for regulation and supervision. Constitutional safeguards must be restored and more energetically enforced. Congress must be cleaned of its "blocs," and the socialistic taint which characterizes much legislation. It will fare ill with the American Republic in years to come if the electorate persists in decimating the ranks of conservatives in both branches of legislatures, filling their seats with NonPartisan League advocates, with so-called Progressives and men who are swayed by un-American theories of government that will divide the country into hostile camps of "privileged interests" and undermine the sacred concepts of property right. The public mind must be disabused of the idea that Wall Street is running the railroads, industries, and dictating the policies toward labor.

We must abolish a system of taxation that attempts to collect taxes for the Government not from citizens in proportion to the benefits received from government, but in proportion to their ability to pay. We must restore the principle that the individual has a right to what he has earned so long as he does not injure his neighbor. If union labor is to function properly it must submit to the obligations of an incorporated body and to the liabili

ties as reaffirmed in the Coronado decision. Arbitration and Industrial Relations tribunals must take the place of strikes and collective bargaining. Protection for the public must displace the idea of "One big union" to control necessities and gain political control.

This country sadly needs constructive, fearless statesmanship in politics and legislation as well as in its industrial relations. There is too much thinking along lines of favoring local constituency and of special interests in Congress rather than recognition of national standards. The Republican majority in Congress has thus far not vindicated its reputation for constructive

measures.

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GENERAL CHARLES G. DAWES COMPLETES HIS GREAT TASK OF ESTABLISHING

THE FIRST GOVERNMENT BUDGET

Genera! Dawes resigned July 1st as Director of the Budget to resume his duties as chairman of the Central Trust Company of Illinois. Left to right: J. C. Roop, Assistant Director under General Dawes; Retiring Director Dawes; Gen. H. M. Lord, new Director; R. O. Kloeber, new Assistant Director

UNIFORM FIDUCIARIES ACT

HE National Conference of Commis

Tsioners of Uniform State Laws will

meet next month in San Francisco to consider the tentative draft of a Uniform Fiduciaries Act drawn up by the Committee on Commercial Law, and which was published in the September, 1921, issue of TRUST COMPANIES Magazine. The legislation to be advocated in various states has been urged in substance for many years by banks and trust companies and transfer agents. It seeks to relieve banks and trust companies from the unwarranted liability encountered in receiving or paying checks drawn by fiduciaries or authorized officers of corporations to personal order as well as in connection with transfer of stock where depository or payee has no knowledge of breach of faith or evidence of infirmity.

The liability of banks and trust companies

has become untenable because of certain

court decisions. Under such rulings banks and trust companies are put on inquiry and constantly confronted with liability for receiving on deposit or making payment of checks to fiduciaries and officials of corporations, where such transactions may constitute a breach of fiduciary obligation or agents are acting dishonestly.

The proposed Uniform Fiduciaries Act is intended to cure this defect in existing law. Under the term fiduciary is included a trustee under any trust, expressed, implied or constructive, executor, administrator, guardian, conservator, receiver, trustee in bankruptcy, assignee for the benefit of creditors, partner, agent, officer of a corporation, public or private, public officer, or any other person acting in a fiduciary capacity for any person, trust or estate.

At the recent annual meeting of the National Bank Section of the New York State Bankers' Association considerable discussion was devoted to the proposed Uniform Fiduciaries Act. It may be recalled that a similar law was introduced in the New York legislature several years ago and passed by both the Senate and Assembly. Due to the opposition to having this law included as an amendment to the Negotiable Instruments Act, it was vetoed by Governor Smith.

ORGANIZED LABOR AND BANKING

T

HERE is an apparent concerted effort on the part of labor unions and organizations to establish banks of their own and to accumulate funds through such channels for their own advancement. The first enterprise of this character, the Brotherhood of Locomotive Engineers Co-operative National Bank of Cleveland, which began business in November, 1920, now reports resources of $14,000,000, and the Brotherhood officials are actively engaged in organizing similar co-operative banks in various cities. The Brotherhood Holding Company was also granted a charter in Cleveland recently to deal in high-grade government, municipal, corporation, real estate and listed securities with a capital of $1,000,000.

In Washington, D. C., the Bank of the International Association of Machinists has The latest venture of this kind is the orbeen organized by metal workers' unions. ganization of the Amalgamated Trust and Savings Bank which was recently opened in Chicago, organized by the Amalgamated Clothing Workers of America with a membership throughout the country, which will be depository for the funds of the national and local unions. The report of the Executive Council of the American Federation of Labor at the recent annual convention in Cincinnati also dealt at some length on the subject of banking facilities, urging the organization of co-operative banks, but also voicing a warning note on the ground that "if trade unions are to venture into the banking business, the urgency for the incorporation of trade unions may become more pronounced and make the bringing of suit against them and the seizure or impounding of their funds more easy of accomplishment."

Labor union banking, so-called, is not deserving of public patronage if it is designed to divert deposits and savings primarily for the advancement of union labor. Its mission should be to help inculcate thrift and the habit of savings among wage earners, to assist them in building homes and acquiring greater independence. To be successful, banking must be governed by principles of service to the public. Any departure from such sound business standards must eventually lead to failure.

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SECONDARY INFLATION AND CHEAP MONEY

T

100 much emphasis cannot be placed upon the present danger of what might be termed a "secondary inflation" for which the stage is all set. Announcement of the reduction of rediscount rates by the New York and other Federal Reserve Banks to 4 per cent. must cause some misgivings to experienced bankers when considered in relation to the tendency to prematurely mark up commodity prices to consumers. With advancing prices there is created a new impulse to stock speculation which receives further encouragement from low call rates. It is only the discrimination and caution observed by banks and trust companies in loaning money and credit that prevents this country from plunging again into an era of overexpansion and untimely inflation of values.

Although pronounced liquidation of loans and rediscounts is evidence of the payment of debts and release of frozen credits, the banking position is not altogether satisfactory. The plethora of money and credit has obliged banks to employ their funds in the investment market. Loans on stocks and bonds are now higher than at any time since 1919. When commercial borrowing is resumed at a stronger pace the banks will liquidate their investments and collateral loans with a result that is likely to be adverse to the security market.

It is true that with reduction of commercial borrowings from Federal Reserve Banks to $279,000,000 as compared with $1,123,000, 000 a year ago, and the ample loaning capacity of member banks, the official discount rate has no appreciable influence upon the market rate for money. From a political standpoint it may be regarded as wise to create the idea of cheap money as a symbol of confidence and returning prosperity. But from a purely banking as well as psychological viewpoint the reduction of rates is undesirable.

To the present time there has been no marked evidence of speculative buying of securities or commodities that may be attributed to the successive reductions in money rates. To the extent that the present large surplus of reserves and credit is predicated upon the mass of gold in the vaults of Federal Reserve banks, it

W. P. G. HARDING

Whose re-appointment as member and Governor of the Federal Reserve Board is urged by the American banking and Trust company fraternity

is well to bear in mind that this gold must be regarded as a trust fund that will be called for when international exchanges are headed toward stabilization.

GOVERNOR HARDING ENDORSED

IF President Harding fails to re-apI point his namesake, Governor Hard

ing of the Federal Reserve Board, it will be in defiance of the expressed unanimous wish of the whole banking fraternity and of his own Secretary of the Treasury, Mr. Mellon. One after another the State Bankers' Association conventions held during May and June have passed resolutions calling upon the President to continue Governor Harding in his responsible office upon the expiration of his present term in August. Among the bankers' associations which have formally passed resolutions to that effect are those of New Jersey, Maryland, Ohio, Washington, Illinois and Iowa. Eugene Meyer, Jr., of the War Finance Corporation, and Comptroller of the Currency Crissinger, are said to be candidates for the Governorship.

TO TEST RIGHTS OF NATIONAL

BANKS AS FIDUCIARIES
NOTHER test suit has been insti-

A tuted to establish rights of National banks as fiduciaries which is likely to come before the United States Supreme Court for decision. The principal issue upon which the latest controversy centers relates to the question as to whether State or Federal law is controlling in regard to conflicting requirements. The famous United States Supreme Court decision of June, 1917, determined the right of Congress to bestow trust powers upon National banks and it also laid down the principle that National banks, in conducting their trust business, must conform to the same laws which apply to trust companies in the various States in the exercise of trust powers.

The difficulty encountered by National banks in different State jurisdictions, notably in Pennsylvania, in failing to obtain the necessary sanctions from the local courts, arises chiefly from the interpretation placed by the Federal Reserve Reserve Board upon amendments to the Federal Reserve Act passed in September, 1918. Some of these amendments, particularly that relating to segregation and deposit of trust funds pending investment as well as examination of national banks having trust powers, are at variance with the laws of States which apply to trust companies. In Pennsylvania the Orphans' courts of Philadelphia County and of Allegheny County have refused to grant necessary papers to National banks on the ground that the Federal provisions are in contravention to State law.

The Corn Exchange National Bank of Philadelphia recently filed a bill of exceptions to a ruling of the Orphans' Court of Philadelphia in which the latter refused an application of the bank to act as guardian in a specific estate. While the appeal is based chiefly upon certain fiduciary transactions requiring the affirmation of the courts, the test case also brings up the issue as to whether State or Federal law is to govern the trust department operations of National banks. It is the intention of the Corn Exchange National Bank, if necessary, to carry the question to the United States Supreme Court for ultimate decision. Trust companies as well as National banks will welcome a final adjudication inasmuch

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RHODE ISLAND DECISION RELATING TO TRUST POWERS

HIEF JUSTICE SWEETLAND of the Supreme Court of Rhode Island has just rendered a decision to the effect that National banks, in that state, cannot execute trusts which arise in probate proceedings without coming into conflict with the laws of Rhode Island governing the administration of trust business in Rhode Island. It is understood that national banks in Rhode Island which have received permission to do trust business are interested in appealing to the higher courts for a final adjudication.

The opinion sustains the demurrer of Attorney General Herbert A. Rice to a petition of the Aquidneck National Bank of Newport for a writ of mandamus to compel General Treasurer Richard W. Jennings to accept $45,000 tendered him by the bank as security for the performance of duties as a trustee, which the bank claimed it could perform under the Federal Reserve act.

The Federal Reserve act gave national banks the right to do the business of trust companies "in so far as the exercise of such power is not in contravention of state or local law." In dismissing the petition for the Aquidneck Bank's writ of mandamus, the court takes the stand that the "exercise of such power" by national banks in this state is in violation of the Rhode Island laws.

The extension by the General Assembly of the powers of trustee to trust companies alone of all corporations "is plainly because the provisions governing their creation and their regulation safeguard in a peculiar manner the legal rights of those beneficially interested in trusts," states the opinion of Justice Sw.tland.

IMPERILING TRADE WITH

CANADA

HE stupid and ostrich-like attitude of the "farmers' bloc in Congress threatens to seriously break down the mutually satisfactory trade relations which have been preserved for many years between the United States and Canada. Because of the Emergency tariff which has virtually cut off the American market to the Canadian farmer, the Canadian Government has put into effect a new fiscal policy which will unquestionably result in diverting Canadian purchases from our country to other markets which recognize the wisdom of the axiom,."Where you sell there you must also buy."

The handwriting is already on the wall, and unless Congress approves the principle of reciprocity in dealing with our northern neighbor, we shall have to reckon with the loss of important markets in Canada. The folly of this is quite apparent when consideration is given to the exceptional opportunities for developing closer commercial and financial relations with Canada. The Canadian Government and people have been most friendly and willing to enter into reciprocal arrangements, but the "farmers' bloc" in Congress has compelled Canada to adopt a policy in which it is entirely justified. Heretofore Canada has obtained 75 per cent. of its imports from the United States, but the tendency of Canadian trade with the United Kingdom and other countries already shows that our business with Canada is rapidly slipping away. In 1920 Canadian imports from the United States were six times greater than from Great Britain, and in 1922 they were only four times greater. In 1921 Canadian exports to the United States were 250 millions more than to Great Britain. In 1922 Great Britain is Canada's chief foreign customer. This change must be attributed entirely to the artificial barriers created by our Congress.

Canada seeks closer financial as well as commercial ties with the United States. American investors have shown an increasing aptitude for Canadian investments. Banking relations between the United States and Canada have been rendered much more intimate by the consequences of the war. With our dominant creditor

position, and considering geographical proximity, there is every reason for adopting a more enlightened trade policy toward Canada, as expressed recently by the Executive

Council of the American Bankers' Association, as follows:

"We declare our faith in the value of a closer community of interest between the United States and our great neighbor, Canada. These two countries constitute the greatest geographical union of Englishspeaking people in the world. There is a natural unity of purpose, unity of political ideals, and unity of business interests between the two peoples that should be emphasized rather than obscured by the border lines between them. We bespeak from American business, American banking and the American public the continued develop

ment of friendly relations between the two nations."

Congress should also give immediate attention to objections of Mortgage Loan Associations of Canada which protest against the Denison Blue Sky Law now under consideration in Washington, on the ground that it unfairly discriminates against first mortgages on Canadian farms. Free flow of capital as well as unhampered commercial relations with Canada must be encouraged.

AMERICA'S INTERNATIONAL

T

CREED

HE unselfishness, the broad humanity and peaceful aspiration which characterize American diplomacy in dealing with international affairs, have rarely been expressed in more compact and virile words than those with which Secretary of State Charles E. Hughes closed his recent address at the Commencement of the University of Michigan, as follows:

"Our ultimate security and the assurance of our progress will not be found in constitutions or statutes or treaties or conferences, important as these may be, but in the self-respect that will not permit abasement; in the national pride and just selfinterest that will not tolerate interference with independence; in the spirit of helpfulness which seeks not alliances but honorable co-operation; in the love of justice

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