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Trust Companies and Financial Innovation, 1897–1914*

Published online by Cambridge University Press:  11 June 2012

Larry Neal
Larry Neal
Affiliation:
Assistant Professor of Economics, University of Illinois, Urbana
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Abstract

Professor Neal assesses the innovative role of a key financial institution — the trust company — during the period of American economic growth after the depression of the 1890's and prior to World War I.

Type
Research Article
Information
Business History Review , Volume 45 , Issue 1 , Spring 1971 , pp. 35 - 51
Copyright
Copyright © The President and Fellows of Harvard College 1971

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References

1 Estimates by Kendrick, John, found in U.S. Department of Commerce, Long-Term Economic Growth, 1860–1965 (Washington, D.C., 1966), 166–67.Google Scholar

2 Ibid., 208–209.

3 Ibid.

4 See Hickman, Bert, “The Postwar Retardation: Another Long Swing in the Rate of Growth?,” American Economic Review, LIII (May, 1963), 490–507.Google Scholar

5 Sylla, Richard, “Federal Policy, Banking Market Structure, and Capital Mobilization in the United States, 1863–1913,” Journal of Economic History, XXIX (December, 1969), 657–686.CrossRefGoogle Scholar

6 Davis, Lance, “The Investment Market, 1870–1914: The Evolution of a National Market,” Journal of Economic History, XXV (September, 1965), 355–399.CrossRefGoogle Scholar

7 North, Douglass, “Capital Accumulation in Life Insurance between the Civil War and the Investigation of 1905,” in Miller, William, ed., Men in Business (New York, 1962), 238–253.Google Scholar

8 Carosso, Vincent, Investment Banking in America (Cambridge, Mass., 1970).Google Scholar

9 Barnett, George, State Banks and Trust Companies Since the Passage of the National Bank Act (Washington, D.C., 1911), 12–22.Google Scholar

10 Cited by Herrick, Clay, “Trust Companies — Their Organization, Growth and Management,” Bankers' Magazine, LXI (January, 1904), 42Google Scholar.

11 Commercial and Financial Chronicle, January 20, 1883.

12 See, for example, Sylla, Richard, “Federal Policy, Banking Market Structure;” Goodhart, C. A. E., The New York Money Market and the Finance of Trade, 1900–1913 (Cambridge, Mass., 1969Google Scholar); and Trescott, Paul, Financing American Enterprise (New York, 1963).Google Scholar

13 Noyes, Alexander D., “The Trust Companies: Is There Danger in the System?,” Political Science Quarterly, XVI (June, 1901), 248.CrossRefGoogle Scholar

14 Ibid., 255.

15 For a detailed discussion of this point see Pesek, Boris and Saving, Thomas, Money, Wealth, and Economic Theory (New York, 1967).Google Scholar

16 See Friedman, Milton and Schwartz, Anna J., A Monetary History of the United States, 1869–1960 (Princeton, N.J., 1963), 175.Google Scholar

17 State of New York, Testimony Taken before the Joint Committee of the Senate and Assembly of the State of New York to Investigate and Examine into the Business and Affairs of Life Insurance Companies, 1905, 6050.

18 Greef, Albert O., The Commercial Paper House in the United States (Cambridge, Mass., 1938).Google Scholar

19 Youngman, Anna, “The Growth of Financial Banking,” Journal of Political Economy, XIV (July, 1906), 435.CrossRefGoogle Scholar

20 Ibid., 438–39.

21 Meade, Edward, Trust Finance (New York, 1910), 97–113.Google Scholar

22 Navin, Thomas and Sears, M. V., “Rise of a Market for Industrial Securities, 1887–1902,” Business History Review, XXIX (June, 1955), 105–138.CrossRefGoogle Scholar

23 Value added from Historical Statistics, 638, and GNP in current prices from Long–Term Economic Growth, 166–67.

24 There is some dispute among economists as to the relative importance of the transactions functions and the liquidity functions of banks and financial intermediaries in general. The major work done to date on measuring the output of commercial banks in the contemporary economy is Gorman, John, “Real Output and Productivity of Commercial Banks” in Fuch, Victor, ed., Production and Productivity in Service Industries (New York, 1969).Google Scholar Gorman uses both concepts and finally opts in favor of the results obtained by the liquidity hypothesis. This decision, however, is strongly criticized by all the discussants. Donald Hodgman, the principal discussant, points out the theoretical error while the perversity of the empirical results is noted by the other discussants.

25 See the testimony of Scudder, Philip, Money Trust Investigation (Washington, D.C., 1913), 990–1001.Google Scholar Scudder counted 158 common directorships in seventy–six companies held by the directors of the Guaranty Trust Co., 113 directorships and fifty–five companies by the directors of Bankers Trust Co., and 144 directorships in sixty–three companies by Astor Trust directors.