The Kirtland Safety Society

#Some Basics of Economics in 1837 America

Prior to embarking on a review of the history of the Kirtland Safety Society, it will be useful to provide you with some basic economic concepts applicable to Joseph Smith’s era in America. These concepts will enable you to better understand what went on. For this section, I will draw heavily on R. McKay White’s article, “The Kirtland Safety Society: The Myths, the Facts, and the Prophet’s Good Name” (2009). Brother White is an attorney and an economist. This background seems ideal for enabling him to provide the necessary background and then critically analyze the Kirtland Safety Society Bank.

Transactions and transaction costs. Every person is often in need of certain goods and services. When the appropriate goods and services are allocated to that person in need, we refer to it as a “transaction.” Transactions are generally beneficial. The reason is that the person in need receives the desired goods and services. And the individual that supplies them receives, in return, other goods and services he desires. Transactions thus improve the overall welfare of those involved in the transactions.

There are things that impede the conducting of transactions. These are called “transaction costs.” They include the time and effort required to complete a transaction. Let us take an example pertinent today. Let us say you desire to obtain some groceries. You have to make a list, travel to the grocery store, walk up and down the aisles looking for the things you want, wait in line until the cashier scans your items, and then pay. Then the transaction is complete. All of those things you had to do prior to its completion are “transaction costs.”

Transaction costs are undesirable. To best make an economy work and satisfy the needs of the people, it is ideal to keep the transaction costs low. When transaction costs are high, the flow of goods and services may become impeded. This reduces the welfare of the people. It is possible that high transaction costs may prevent a good from being transferred to someone who desires it. An important part of economics is to figure out low to minimize transaction costs.

The importance of money. Money helps reduce transaction costs. When there is no money, the people are left with a barter system or barter economy. Transactions occur by barter. Goods and services cannot be bought and sold. Instead, goods and services must be traded. There are major problems associated with a barter system. First, there is confusion and uncertainty over the value of a good or service. Its value depends upon what the “shopper” is willing to trade for it. The lack of clear valuation results in higher transaction costs. Another problem is the necessity of “coincidence of wants.” It is not enough for the shopper to find someone selling an item he wants. He must also have something the seller is willing to trade for. This also requires much time and effort. It also results in high transaction costs. Because of these costs associated with barter, barter economies are inefficient and hamper economic progress.

Money provides a helpful solution. It can act as a medium of exchange. It eliminates some of the problems associated with a barter economy. In a system involving money, the value of a good or service can be easily valued. Also price comparisons can be made. There is no necessity for a “coincidence of wants.” There is no need for negotiation.

The banking system in 1837. In 1837 America the economic system was much different than it is today. The banking system was in its infancy. There was no central bank in the country—no Federal Reserve producing and controlling the flow of dollar bills. There was no national currency. The only national medium of exchange was specie—gold, silver, and copper coins minted by the government. Each coin was worth what the metal it was composed of was worth.

Specie eliminates the problems of a barter economy, but only so long as there is enough specie to go around. If the supply of specie does not grow fast enough (which was often the case), transaction costs rise sharply and economic growth is retarded. Given the difficulty and cost of minting new specie, it is clear that a specie-only economy is not satisfactory.

The problems with specie were ameliorated by bank notes issued by local banks. A bank note was a piece of paper issued by the local bank. It was, in essence, a debt instrument. A one dollar bank note was an obligation of the issuing bank to pay one dollar in specie to the bearer if turned in for redemption. This gave the notes value. A banks note was usually honored only in the area of the local bank.

The three main purposes of banks, both in 1837 and now, were:

1. Increase the money supply. Banks increased the money supply by operating on a “fractional reserve” basis. As stated, bank notes could be redeemed for specie. For the most part, they weren’t. There was no reason to. What baks did, then, was issue notes beyond the amont of specie held in their vaults. They aonly had to maintain the amount of specie necessary to meet day-to-day demands. by increasing the money supply and providing flexibility to that supply, banks eliminated the short-comings of specie.

2. Make loans. Another way for the bank to increase the money supply was to give bank notes to an individual in exchange for a promissory note—in other words, to lend the individual money. The bank’s note (actually, the banks debt) had general acceptability as a medium of exchange. The promissory note of an individual had less acceptability as a medium of exchange. This is referred to as the bank’s “monetizing private debt.” In other words, it is the turning of a private individual’s promissory note into bank notes—an acceptable medium of exchange. By this means a growing demand for money can be met.

It is rare for businesses and individuals to carry enough money for large economic projects like business expansion or start-up. Banks provided loans to enable economic expansion. By 1837 the United States had been experiencing a long period of economic prosperity. This was accompanied by an explosion in the number of banks. The banks met the urgent need for credit created by business expansion.

3. Provide liquidity. Liquidity is a measure of how easily something can be used as a medium of exchange—how easily something can be used to make transactions. Debts have varying degrees of liquidity. Banks notes (money) are obviously the most liquid “asset.” While we may refer to bank notes as an asset, it must be kept in mind that a bank note is simply evidence of the bank’s debt.

Farmers in 1837 were not poor, but their assets were in the form of land and equipment. These assets were very illiquid. This made the buying and selling of goods difficult. In that day, it was common for sales to be made on an “open book account” basis. The closing of the books would occur only once a year. Business of this sort was and is risky. Wen the day of reckoning comes at the end of the year, the debtor may be unable to pay. Banks resolved this problem by enabling farmers to borrow cash with their assets as collateral.

An illustration may be helpful in understanding the importance of banks in 1837. Consider someone looking to buy land for a farm. He has little money, but a speculator is willing to sell him good land for an obligation to pay at some time in the future. The new farmer works hard. He builds a house, plants crops, and makes other improvements. He has an excellent harvest and sells it all. The buyers don’t have enough specie, so they give promissory notes. This isn’t a problem. It was common to do business by promissory note, because of the lack of specie. The farmer is pleased. He’s earned enough money to pay back the speculator. It comes time to pay. The farmer offers the promissory notes, but the speculator refuses. He demands specie. The farmer doesn’t have specie. Those who owe him based on the promissory notes don’t have specie. The farmer defaults on his debt obligation. He loses the farm, and all the improvements he made to the land. The speculator moves in and enjoys the fruits of the farmer’s efforts. This scenario was common. It could be avoided by a bank. Rather than being paid by promissory note, the farmer could be paid with bank notes. If the speculator refused the bank notes, the farmer could redeem them at the bank for specie. He thus paid his debt in specie and kept the farm and all the work he put into it.

For all these advantages, there were also risks. Banks solved the problems of a specie-only economy, but introduced other potential problems. The first is the risk of a run on the bank. In 1837, there were two types of bank runs that could occur. The first had to do with the redemption of bank notes for specie. As stated above, banks operated on a “fractional reserve” basis. That is, they issued bank notes in excess of the actual amount of specie they held. Usually this wasn’t a problem. It happened now and then, however, that for whatever reason a large number of customers would seek to redeem their notes. In this way, the bank’s specie reserve could be severely depleted of even exhausted. Unless the bank stopped redemption, the bank would be ruined. By stopping redemption, however, confidence in the bank’s notes would decrease. The usual consequence was that the notes would trade for a discount, if at all. The second type of bank run is one that can still occur today. Like today, people made deposits of money in banks. Periodically, they would add to or withdraw from their bank account. Banks did not, and do not, simply keep the deposited money in the safe. They only needed to keep a reserve sufficient to meet day-to-day demand. The rest was loaned out to others or otherwise invested. This is how banks make money. But just as customers could make a run on the bank’s’ specie reserve, they could also make a run on its deposit reserve. If enough customers try to withdraw their money, the bank’s reserves run out and it fails.

Another potential problem with banks was inflation. There were two means by which inflation could occur. The first type of inflation is the same as occurs today. If banks printed too much money, there would be an oversupply. The value of a dollar decreased. The result was that prices increased—there was inflation. Also, if an individual bank printed too many bank notes, that excess in number of bank notes would decrease confidence in the bank’s ability to redeem them for specie. As a result, a one dollar note from that bank decreased in value. But other banks’ notes and specie were still as valuable. Therefore, instead of the general price level rising, that bank’s notes would trade at a discount. Instead of being accepted as one dollar, a one dollar note would be accepted as 75 cents, or even less.

It should be noted that there are other possible cause of inflation. Inflation isn’t always because of an oversupply of money. Inflation can be demand driven. If demand for goods increases faster than supply, you have more people vying for the same goods. As a result, the price is bid up. If prices are bid up, you have inflation. The solution to this type of inflation is to either increase supply or find a way to reduce demand.

#The History of the Kirtland Safety Society

The period of time between the dedication of the Kirtland Temple in March 1836 and the summer of 1838 was a period of unparalleled adversity, contention, and apostasy in the Church. It was the period of the establishment and failure of the Kirtland Safety Society, the church’s bank in Kirtland. Perhaps no event in the early church’s history was the source of as much criticism of the Prophet. As a result of failure of the Kirtland Safety Society, critics accused Joseph Smith using poor judgment and of being a false prophet. They used the demise of the bank as an argument against the divinity of Mormonism.

Joseph summarized this period of time by saying, “It seemed as though all the powers of earth and hell were combining their influence in an especial manner to overthrow the Church.” Joseph then added a most interesting observation: “Many became disaffected toward me as though I were the sole cause of those very evils . . . which were actually brought upon us by the brethren not giving heed to my counsel” (HC, 2:487-89). Let us look carefully at this troubled time to help us better understand just what happened.

As a resource for the basic history of this period, we will borrow from Milton V. Backman, Jr.’s, book The Heaven’s Resound (310-66). Some materials will be quoted and some paraphrased.

The year following the dedication of the Kirtland Temple saw a spirit of pride, selfishness, disaffection, and apostasy sweep through the quorums of the Church. In the summer of 1837, members of the Quorum of the Twelve, witnesses to the Book of Mormon, and other priesthood leaders met in the upper room of the Kirtland Temple. Throughout the preceding year many of these same individuals had witnessed, in that same building, some of the most remarkable spiritual manifestations ever experienced in the history of the restoration movement. Now they were meeting to oppose the leadership of Joseph Smith. At this assembly, some persons who had once been faithful supporters of the Prophet recommended that he be replaced as president of the Church by David Whitmer. Others vehemently opposed this motion, including Brigham Young. The brethren in attendance barely avoided coming to blows. According to Brigham Young, at this time “the knees of many of the strongest men in the Church faltered” (Watson, Manuscript History of Brigham Young, 17).

The historical roots of apostasy among Kirtland saints reached back to the establishment of a policy of community improvement and expansion. There followed a period of improved economic conditions. Then, the saints experienced a year of economic disaster. Following the temple dedication, many of the saints developed the desire to enlarge their homes, erect new dwellings and shops, and beautify their community. A master plan for the improvement of Kirtland was drafted by Joseph in 1836. According to this plan, Kirtland was to be divided into rectangular plots and square blocks, with streets bisecting each other at right angles. In the fall and early winter of 1836, the saints became involved in various construction projects. They seemed happy and, by all accounts, they felt they were participating in a vibrant program of community growth.

During this era of rapid growth, church leaders and other members were acquiring additional property in Kirtland. Property held by the members in 1836 was not considered sufficient to meet current needs and future plans. Additional land was needed, not only for those who had settled in Kirtland, but also for others who would be immigrating there. Joseph and other leaders of the Church undoubtedly viewed the future optimistically.

While members of the Church were increasing their property holdings in Kirtland, land prices rose sharply, and it seemed that inflationary conditions would continue.

According to an editorial appearing in the June 1837 issue of the Messenger and Advocate, the price of land in Kirtland during the preceding year had increased some eight hundred percent!

To secure the money needed for economic expansion, many of the saints were forced to borrow. Lenders were willing to extend credit to the saints seeking financial assistance, since the land they pledged for security could be reclaimed if need be. Since Kirtland was expected to continue growing, with land values increasing at a normal inflationary rate, creditors assumed that the Mormons could manage all the debts they had accumulated.

Another factor contributed to the looming financial problems of the saints. During construction of the Kirtland temple, members of the Church in the East and other areas of North America had sent contributions to Kirtland. These funds had temporarily bolstered the town’s economy. These donations decreased after the temple was dedicated, and this decrease in cash inflow occurred at a time when the debts of the Kirtland saints were at a maximum. Because of the consequent cash flow deficiency, church leaders sought a means to transform into cash some of the assets they and other members possessed in land. One means to which they now gave consideration was the establishment of a bank in Kirtland. This would allow them to borrow against their now valuable land holdings.

Banks provided loans, a medium of exchange, and a safe depository for money. To meet public demand of a readily acceptable medium of exchange, banks would provide notes or currency in exchange for promissory notes of individuals and businesses. This currency was initially backed by, and could be redeemed for, specie (precious metal coin). Also, the currency was secured by real estate. This bank currency could be used quite readily to secure goods and services. Local bank currency was generally accepted only within a small geographical area served by that bank, and it was heavily discounted by banks outside that particular area.

On November 2, 1836, leaders of the Church in Kirtland, probably with the help of a non-Mormon attorney, drafted an article of agreement providing for the organization of a banking institution to be called the Kirtland Safety Society Bank. Orson Hyde was dispatched to Columbus with a petition directed to the Ohio legislature, requesting approval for the incorporation of a banking institution. Church leaders, assuming that the legislature would grant the request, also sent Oliver Cowdery to Philadelphia to secure plates for the printing of currency. On January 2, 1837, both men returned to Kirtland. Oliver Cowdery returned with the plates, but Orson Hyde returned with discouraging news. The legislature had refused to consider the Mormons’ petition.

The saints, disappointed by the rejection of their request to incorporate a bank in Kirtland, decided to reorganize and create a private joint-stock company. Since they could not call it a bank, they named it the Kirtland Safety Society Anti-Banking Company. They apparently assumed that individuals had a legal right to organize a private company that engaged in banking activities, since other unchartered or unauthorized banks were organized in Ohio before and after the Kirtland Safety Society was constituted. There were, however, laws against the formation of such unauthorized banks.

Many persons in the Kirtland area initially supported the formation of the Kirtland Safety Society. Church leaders served as officers—Joseph Smith as treasurer and Sidney Rigdon as secretary. Both members and non-members bought stock in the company. Most of the stock was purchased during the last three months of 1836, before the company was constituted. Two hundred investors purchased (primarily with gold and silver) shares in the company, with subscriptions totaling about twenty thousand dollars.

On January 3, 1837, the Kirtland Safety Society opened its doors for business. Using the plates that Oliver had secured, the company issued its first notes during the first week of January, stamping on some of the currency words that changed “Bank” to “anti-Bank-ing Co.” This first issue consisted of $1, $2, and $3 denominations and amounted to about ten thousand dollars. Additional notes of denominations ranging from $1 to $100 were issued in February and March, bringing the total to perhaps one hundred thousand dollars. This amount far exceeded the amount of gold and silver coin placed on deposit in the bank. Thus, it was impossible to redeem all of the currency or bank notes for specie. This one hundred thousand dollars in currency was felt to be adequately backed by real estate, however.

Shortly after the Kirtland Safety Society began to function, serious problems interfered with its successful operation. The success of any banking institution depended upon public support, and anti-Mormon newspapers delighted in branding its currency as “worthless rags.” Banks typically did not possess sufficient specie to satisfy large demands for redemption of their currency. Since the capital backing the Kirtland Safety Society was primarily in the form of land, in order for the society to continue as a successful business enterprise, supporters had to prevent individuals from securing large amounts of the Safety Society notes. Enemies of the church, however, managed to obtain sufficient quantities of the notes to initiate a run on the institution. On January 23, only a few weeks after the first notes were issued, Sidney Rigdon announced that the Society could no longer redeem its notes with specie. Thereafter, its notes were subject to heavy discounts.

Another reason for the failure of the company was the fact that the operations of the Kirtland Safety Society were in violation of the laws of Ohio. When church leaders decided in January 1837 to charter a bank in Kirtland, they and their legal advisers had not understood that forming a company with banking powers would be considered illegal. In February, Joseph Smith, Sidney Rigdon, and other leaders of this company were charged with violating an 1816 Ohio statute that prohibited the issue and circulation of unauthorized bank notes or currency and fixed a penalty of one thousand dollars for each of the company officers of institutions that violated this law. In June Joseph resigned as an officer in the company and withdrew his support of the institution. In August Warren Parrish was caught defrauding the bank of funds by counterfeiting or indiscriminately printing currency that had no backing. In October a jury found Joseph and Sidney guilty of violating the law, and a judgment amounting to one thousand dollars was assessed them. Finally, in November the company closed its doors.

As the Prophet had struggled to prevent the Kirtland Safety Society from collapsing, he produced serious financial difficulties for himself. He had invested more than any other single investor except John Greene. In February and March, when the company was experiencing financial difficulties, he increased his subscriptions. To obtain money to invest, he made three loans and sold some property. He accumulated personal debts amounting to approximately one hundred thousand dollars. Although he had assets in land and goods that were of greater value, he was unable to immediately transform these assets into a form that could be used to pay his creditors.

The demise of the Kirtland Safety Society intensified the economic problems of the Kirtland saints. The two hundred individuals who invested in the bank lost nearly everything they subscribed. As the months passed, many still held bills that had no redeemable value. When the company failed, many persons lost their savings, and a few were ruined financially. It has been estimated that the financial losses approached $40,000—almost the total cost of building the Kirtland Temple. This loss was sustained by persons whose income averaged about four hundred dollars annually. In the spring of 1837, the Church also found itself heavily in debt, and many creditors were unable to extend credit or postpone dates when debts were due. Joseph and other church leaders were in an awkward and embarrassing position. While the Prophet’s creditors pressured him to pay for supplies he had purchased, he was unable to apply this same pressure on members of the Church who had purchased goods from him on credit.

In the summer of 1837, in the midst of financial reversals, Joseph was involved in what he called “malicious and vexatious lawsuits.” Enemies of the Church continually harassed him, indicting him on one charge after another. Most of the legal proceedings against Joseph were cases involving debts. During 1837, seventeen lawsuits were filed against Joseph for debts involving claims of more than thirty thousand dollars.

On July 27, 1837, Joseph set out on a trip to visit the saints in Canada, accompanied by Sidney Rigdon, Brigham Young and others. They got only as far as Painesville, Ohio, where the Prophet was arrested. After a preliminary hearing, he was released by the court for lack of evidence. Within a short time he was again arrested by the sheriff, and again he was released. In fact, on that day he was arrested six times, charged with various offenses, and each time the case was dismissed for lack of evidence. After spending all day in Painesville, Joseph and his companions returned to Kirtland. They commenced their mission again the next day.

As he returned from Canada, Joseph was again detained in Painesville. According to an account by Mary Fielding, based on information she learned from the Prophet, he and Brigham Young were seized by a mob when they were about four miles from home. Taken to a tavern in Painesville, they escaped through the kitchen door, aided by a house keeper who was a member of the Church. The mob, upon learning of their disappearance, took up the chase. Joseph and Brigham fled through dense woods and along muddy roads, hiding in swamps and behind trees and logs. At times their pursuers, carrying blazing torches, were so close that the two men feared their own heavy breathing might be heard. At dawn they finally reached Kirtland.

During this period of economic distress and increasing opposition against the Church, many converts apostatized. Eliza R. Snow observed that even many of the saints who had received marvelous spiritual blessings during the period of the temple dedication left the Church. Sister Snow attempted to explain the sequence of events that led to this tragic apostasy. She commented that following the temple dedication, the saints found that “prosperity was dawning upon them.” As economic conditions improved, some became “haughty in their spirits” and were lifted up in pride. As individuals “drank in the love and spirit of the world,” she added, “the Spirit of the Lord withdrew,” and “they were filled with pride and hatred toward those who maintained their integrity” (Biography and Family Record of Lorenzo Snow, Snow, 20).

At the same time pride was being manifest among the saints, a spirit of selfishness emerged. As the saints were anticipating the commencement of an era of prosperity, some developed an inordinate desire to become suddenly and vastly wealthy. In an article in the Messenger and Advocate in May 1837, editor Warren Cowdery suggested that the unbridled desire to accumulate worldly wealth led some of the saints into mercenary and deceptive business practices in Kirtland. He wrote of unscrupulous brethren who were taking advantage of others and, after obtaining their money, deserting them. Cowdery particularly warned church members who were planning to immigrate to Kirtland to beware of individuals who approached them shortly after their arrival and inquired concerning their financial status. Some persons were reportedly taking advantage of newcomers by describing unusual investment opportunities that would lead to financial gain and abundant blessings from the Lord, but actually would eventually deprive the investors of their savings.

In addition to pride and selfishness, a third major force leading to an apostasy in Kirtland was criticism of the prophet Joseph. He was criticized for his business transactions, for excessive borrowing, for speculation in land, and for supporting a banking institution that was experiencing serious problems. Some critics blamed the Prophet for the economic reversals of 1837, failing to recognize that Joseph was a mortal, subject to the weaknesses of the flesh, and was not directed in all of his personal affairs by the Lord. He became a scapegoat upon which many tried to unload their problems. A rumor was circulated that the Kirtland Safety Society had come about through revelation and Joseph Smith had predicted the company would never fail, so some persons claimed the demise of that institution was evidence he was a fallen prophet. Recognizing that he had been misrepresented, Joseph testified before the Kirtland high council that he had never uttered nor authorized a statement concerning the infallibility of the banking company. He declared, in September 1837, that he had always maintained that “unless an institution was conducted on righteous principles, it would not stand” (HC, 2:510).

In mid-1837 many members living in Kirtland, including some who had been called to serve in the highest positions of responsibility, rejected the leadership of Joseph Smith, declaring that he was no longer a true prophet. While Joseph was lying in bed with a debilitating illness during the month of June, apostates circulated a rumor that he was suffering because of his transgressions in leading the Church into a desperate financial situation. When Heber C. Kimball began his mission that same month to England, he said that John F. Boynton, one of the Twelve, called him a fool for leaving home at the call of a “fallen prophet.”

Parley P. Pratt was among those who censured the Prophet and Sidney for their “business transactions.” He admitted that “under feelings of excitement, and during the most peculiar trials,” he wrote a letter condemning the actions of his two brethren. After the letter was published by a non-Mormon in what Elder Pratt called a garbled form, he recognized his mistake and sought forgiveness from the Church and those whom he had offended (Elders’ Journal 1 [August 1838], 50).

Another factor that precipitated an apostasy of members in Kirtland was immorality. Referring to the priesthood leaders who left the Church in the fall of 1837, George A. Smith observed that after the “spirit of adultery or covetousness” had seized control “of their hearts . . . the Spirit of the Lord left them” (George A. Smith, JD, 7:115). A few members in Kirtland entered into the practice of plural marriage without the authorization of church leaders. They justifying their actions by asserting that Joseph Smith had taken plural wives. Indeed, the Prophet had received revelation relative to eternal and plural marriage in the early 1830s and may have been practicing plural marriage before 1835 (see Joseph Smith’s Polygamy, page ). It was also asserted that Joseph Smith’s practicing of plural marriage was harming the Church. Joseph’s critics asserted that it provided members with an excuse to justify their transgressions. They claimed it also caused others to leave the Church because they did not understand the eternal principles involved in this marital law and found the idea of polygamy abhorrent.

In the fall of 1837, while Joseph was visiting the saints in Missouri, criticism of him was rampant and reached an ugly schismatic dimension. The selfishness, murmuring, lust, and contention that had been manifest among the saints in Kirtland led to a “great apostasy.” Repudiating the Prophet’s leadership, about thirty priesthood bearers renounced the Church and organized a new church in Kirtland under the leadership of Warren Parrish. They adopted the name “Church of Christ” and tried to seize control of the temple.

Between November 1837 and June 1838, possibly two or three hundred Kirtland saints withdrew from the Church, representing from ten to fifteen percent of the membership there. Many of the apostates had served in major positions of responsibility. During a nine-month period, almost one-third of the General Authorities were excommunicated, disfellowshipped, or removed from their Church callings. Among those who left the Church during this stormy period were the three witnesses to the Book of Mormon (Oliver Cowdery, David Whitmer, and Martin Harris), four apostles (John F. Boynton, Lyman E. Johnson, Luke S. Johnson, and William E. McLellin), three of the original presidents of the First Quorum of Seventy, and two of the presidents of Seventy who were serving in 1837. One member of the First Presidency, Frederick G. Williams, was released from his calling. Although some of these leaders were not excommunicated until after they had moved to Missouri, the roots of their apostasy stem back to transgressions that occurred in Kirtland. Almost half of those who were excommunicated, disfellowshipped, or dropped from their position of responsibility in 1837 or 1838 later repented and returned to the Church.

Some of the apostates became bitter enemies of the saints and organized to expel them from Kirtland. Dissidents tried to seize the property of the saints and threatened to kill members of the Church. Enemies outside the Church were also involved in oppressive actions. Extreme security measures became necessary. While some members guarded the temple twenty-four hours a day, others slept near the Prophet, to preserve his life from his enemies.

When Brigham Young described conditions existing in Kirtland on December 22, 1837, the day of his departure from that community, he claimed that he fled for his life because of the fury of the mob. After making hasty preparations for a journey of more than eight hundred miles, he left his wife and his three-year-old son and one-year-old twins, mounted his horse, and galloped southward. His flight was the beginning of a mass exodus from Kirtland. Between the end of December 1837 and the middle of July 1838, probably more than sixteen hundred members of the Kirtland branch migrated west, abandoning their homes and beginning a new colonizing adventure in the wilderness of western America.

Three weeks after the first saints left Kirtland, Joseph Smith and Sidney Rigdon also fled. “Persecution became so violent,” Lucy Mack Smith observed, that “Joseph regarded it as unsafe to remain any longer in Kirtland” (History of Joseph Smith, Lucy Mack Smith, 247). He and Sidney rode from Kirtland on the night of January 12, 1838, fleeing from disgruntled creditors, angry apostates, and civil authorities. They rode southward under cover of darkness and arrived the next morning in New Portage, about sixty miles from Kirtland. Three days later, after the Prophet’s wife, Emma, and their children arrived in Norton, the group continued their journey in covered wagons.

Though the weather was bitterly cold, the Prophet wrote that a mob, armed with pistols and guns, followed him for about two hundred miles. During the pursuit, his enemies once stayed in a home where the saints were sleeping, with only a partition separating the Smith family from their pursuers. That night, the Smiths listened to “their oaths and imprecations, and threats” concerning actions they would take if they seized the Mormon leader. On other occasions, members of the mob passed Joseph and his family but failed to recognize them.

Joseph and his family and traveling companions traveled through Indiana and Illinois, crossed the Mississippi River, and headed across the state of Missouri toward Far West. When they were within 120 miles of their destination, they were met by some saints from Far West who had brought wagons, money, and provisions for them. When they were eight miles from the city, they were met by another escort group, and on March 14, as they reached the outskirts of Far West, a large number gathered to welcome them.

Although most of the saints went west in small groups of less than fifty, one company of more than five hundred persons traveled in a body that was called “Kirtland Camp,” and sometimes the “Kirtland Poor Camp” as they were, for the most part, the poorest of Kirtland’s inhabitants. On July 5, participants in the Kirtland Camp party gathered in a clover field about one hundred rods south of the temple. That day many pitched their tents, and at night they slept near their wagons and teams. The next day, about noon, a stream of about fifty-nine wagons began rolling from Kirtland. Included in this first company and those who followed shortly thereafter were about 515 pioneers with twenty-seven tents, ninety-seven horses, twenty-two oxen, sixty-nine cows, and one bull. After the company left, only a few Latter-day Saints remained in Kirtland.

Throughout the journey to Missouri, the presidents of the First Council of Seventy served as the governing council of Kirtland Camp. This journey, as documented in the journals of participants, was an arduous yet colorful one. Roughly half of the Kirtland Camp actually made the entire journey to Far West. The other half dropped out along the way, mostly due to illness. Most who dropped out remained at Springfield, Illinois, and later gathered at Nauvoo after the main body of saints had been driven from Missouri.

On October 2, the wagons of Kirtland Camp rolled into Far West, having traveled eight hundred and seventy miles from Kirtland. As they neared the end of their journey, they were met by Joseph Smith, his brother Hyrum, Sidney Rigdon, and a few other church leaders who escorted them during the last five miles. At the request of the Prophet, members of Kirtland Camp resumed their travels on October 3, and the next day they settled twenty-two miles north of Far West at the place Joseph Smith had identified, through revelation, as the location where Adam blessed his children and predicted what would befall his posterity. The Lord named this place, “Adam-ondi- Ahman.” It is ironic that Kirtland Camp had arrived in Far West less than a month before Missouri governor Lilburn Boggs’ Extermination Order resulted in their being driven out of the state.

Doctor Davis Bitton chronicled the decline of the Church in Kirtland after the great body of saints had left in the summer of 1838 (“The Waning of Mormon Kirtland,” BYU Studies 12:4 [1972]). He notes: “It is surprising how long it took for Mormonism in Kirtland to fade away.” In November 1839 Brigham Young and Heber C. Kimball stopped in the village of Kirtland on their return from their mission in England. They found “a good many friends and brethren who were glad to see [them].” The Kirtland Temple was still being used, and Brigham Young preached a sermon there. Brigham Young noted that many of those church members who remained in Kirtland lacked the “energy” or “disposition” to move west to join the saints. In October 1840, Almon W. Babbitt was named to preside over the Kirtland saints which were said at that time to be between 300 and 400 strong. Under his leadership this number grew to about 500 by October 1841. But in the October 1841 conference in Nauvoo, Brother Babbitt was disfellowshipped for teaching false doctrine. Still Mormonism did not disappear quickly. Justin Brooks succeeded brother Babbitt and in the conference of October 1842 there were still “500 to 700” in attendance. By April 1843 the Kirtland saints were strongly encouraged to move to Nauvoo. Apparently many did move, and from the spring of 1845 it becomes difficult to document the activities of any saints left in Kirtland. At the end of 1845, it was reported that a group of “rioters” seized control of the Kirtland Temple. The temple was later used as a Kirtland community hall. From that time on it would seem that only a very few committed saints, several partly committed members, many apostates, and a few splinter groups remained.

The trials of the Kirtland saints did not end when they reached the Missouri frontier. On October 27, 1838, less than one month after the Kirtland Camp arrived there, Governor Lilburn W. Boggs issued one of the most intolerant decrees uttered by an executive in the history of the United States. After telling General John B. Clark of the Missouri militia that the “Mormons must be treated as enemies,” the governor ordered him to exterminate or drive members of the faith from that state (HC, 3:175). Some of the participants in the Kirtland Camp had settled in a community called Haun’s Mill, and on October 30, Missouri militiamen suddenly attacked the saints living there. The threats of death they had heard while crossing Missouri became a reality. Seventeen saints were killed, and thirteen others were wounded.

Throughout the long winter of 1838-39, hundreds of Latter-day Saints fled again from persecutors. Many had been forced to abandon Kirtland in 1838, and now they were being driven from the state of Missouri. Fortified by their faith, many of the former Kirtland saints settled in Iowa and Illinois and helped build a new city, Nauvoo, on the banks of the Mississippi River. Within a few years, they would once again have to abandon their homes, cross a vast wilderness, and begin a new life in the great basin of western America.

#Criticisms Leveled Against Joseph Regarding the Kirtland Safety Society

The prophet Joseph has been much criticized for his role in the Kirtland Safety Society. The remainder of this chapter will examine closely these charges and claims.

I will consider several specific accusations.

Kirtland’s economy did not justify a bank. One author noted: “Looked at from the dispassionate ground of a business view alone, one can hardly criticize the Mormon leaders for many of the ventures into which they were led” (Kennedy, J. H., Early Days of Mormonism, [Charles Scribner’s Sons: 1888]). The Kirtland Safety Society was one such venture. No criticism can justly be made, because the Safety Society was both feasible and necessary.

The United States experienced tremendous economic expansion in the 1830s. This expansion increased the demand for money and credit. The increase in the number of banks met this demand. Kirtland was no exception,. Just like many other parts of the United States, a bank was necessary. Economic conditions made it so. Given Kirtland’s abundance of raw materials, labor, and entrepreneurial talent, and its rapidly expanding economy, the only limit on productive growth was a shortage of money. There was a need for the services a bank provides: liquidity, an increased money supply, and a source of loans.

Hill, Rooker, and Wimmer (“The Kirtland Economy Revisited: A Market Critique of Sectarian Economics,” BYU Studies, 17, 1976) provide a thorough analysis of Kirtland’s economy. They conclude conditions were very prosperous. It’s easy to see how that conclusion can be drawn. The Kirtland area produced dairy products, sheep, maple sugar, grain, cattle, iron castings, ash, and bricks. It also had a tannery. When the extension of the Ohio canal to Cleveland was completed in 1833, trade drastically increased for the area. For example, trade in wheat and flour increased tenfold (Ibid.). When an economy is booming, there is demand for financial services. Businesses need money to expand production to meet increasing demand. Banks provide that money in the form of loans. Without a bank, businesses in the Kirtland area would find it very difficult to expand. The increase in demand would not be met, and inflation would become severe.

Inflation was, in fact, a problem in Kirtland. The mid-1830s saw a general increase in the price level (Ludlow, Daniel H. “Kirtland Economy,” in Encyclopedia of Mormonism, vol. 4 [New York: Macmillan Publishing Company, 1992]). Land prices increased 500% from 1830 to 1837 (Hill et al, 1976) and food prices increased by almost 100 % from 1836 to 1837 (Anderson, Karl Ricks, Joseph Smith’s Kirtland: Eyewitness Accounts. [Salt Lake City: Deseret Book Company, 1989]). This inflation was due, in part, to the inability of firms to increase production to meet demand. A bnk was needed to fund expansion projects.

Kirtland clearly had a money shortage. We do not know how much specie was in the area, nor do we have any data from which to estimate the amount. But we can look at some circumstantial evidence and draw conclusions from that. Firstly, there were no banks nearby. Money could not be transferred electronically. Bank notes could not be redeemed just anywhere. Banks had a limited effective area of service. There were no banks close enough to Kirtland to supply significant amounts of money. Secondly, specie was limited. This was true over most of the United States, but particularly true in the west and in Kirtland (Firmage, Edwin Brown and Richard Collin Mangrum, Zion in the Courts [Illinois: University of Illinois Press, 2001]).

The final cause of a money shortage was that demand for money was increasing. Three factors were causing the increase in demand. Firstly, the population was growing (Hill et. al., 1976). More people in an area increases the number of transactions being made. With more transactions, more money is needed. Secondly, incomes were rising (Ibid.). Wages were not paid by direct deposit. They were paid with money. If more must be paid out in incomes, more money is needed. Thirdly, there was inflation, as explained. Because prices were increasing, each transaction required more money. Again, the demand for money increases.

Given no bank in the vicinity, a limited supply of specie, and increasing demand for money, we can conclude there was a shortage of money in the Kirtland area. There is evidence this conclusion is correct. In the Painesville Republican (vol. 1, no. 10, Thursday, January 19, 1837), the editor expressed the following in an announcement of the formation of the Kirtland Safety Society:

It is said they have a large amount of specie on hand and have the means of obtaining much more, if necessary. If these facts be so, its circulation in some shape would be beneficial to community, and sensibly relieve the pressure in the market so much complained of.

That pressure in the market was the shortage of money.

Finally, while the Safety Society’s notes were accepted, the commercial health of Kirtland was improved (Fielding, Robert Kent [1957] “The Growth of the Mormon Church in Kirtland, Ohio,” Doctoral dissertation, Indiana University)).

The Safety Society was infeasible and unnecessary from the outset. Having established that a bank was necessary in Kirtland, it is a simple matter to establish its feasibility. Kirtland was prospering, and given economic knowledge at the time, no one could have foreseen that that would change. An economy as prosperous as Kirtland’s, with as much production and diversity of products as Kirtland, could support a bank.

There was also demand for the services a bank offers. There was demand for an increase in the money supply. There was a demand for loans to expand production. There was a demand for increased liquidity—for farmers trying to keep their farms and the improvements they had made. If there is demand for a service, provision of that service is feasible.

Finally, the Safety Society had significant assets (Dudley, Dean A. [1970] “Bank Born of Revelation: The Kirtland Safety Society Anti-Banking Company,” The Journal of Economic History 30). Most of the assets were in land (Ibid.), but that was true of most banks (Kroos, Herman E., American Economic Development [Englewood Cliffs, N. J.: Prentice-Hall, 1955]). There weren’t really any alternatives. There was no stock market as there is today, or global market in commodities. Banks were very limited in the types of assets they could hold. They were, for the most part, quite illiquid. But in this, the Safety Society was no exception.

The Safety Society was too risky because Joseph Smith and Sidney Rigdon didn’t know how to run a bank. Linked to the issue of feasibility is the issue of risk. Was the Safety Society’s risk acceptable? Were Joseph’s and Sidney’s bank management skills simply inadequate. It was common for banks in the west to be started by people without experience (Partridge, Scott H. [1971-72] “The Failure of the Kirtland Safety Society.” BYU Studies 12). Anyone who knew how to run a bank was already doing so. There were no educational institutions at which people could earn a degree in bank management. The people emigrating to the western frontier weren’t established eastern businessmen. So, in view of the fact that starting a bank without experience was typical, this criticism is insignificant.

Other organizations exhibited much riskier behavior. It was common for states, municipalities, and businesses to undertake economic projects beyond their ability to pay (Ibid.). Many defaulted on their financial obligations. The Safety Society, therefore, did not exceed any expected level of risk. In the social and economic context, its risk was acceptable.

Joseph Smith intended to use the Safety Society to defraud people of their money. The church’s financial affairs and Joseph’s personal financial affairs were one and the same. He had to manage the growth and establishment of the Church. He was in charge. He incurred significant debts both personally and in the name of the Church. On the other hand, he also had significant assets. His assets were sufficient to over his debts (Adams, Dale W. [1983] “Chartering the Kirtland Bank.” BYU Studies 23). He had a major problem, however. Whereas his debts were short term and liquid, his assets were mostly land, which is very illiquid. This created a cash flow problem. He couldn’t readily turn his assets into cash to pay his and the church’s debts.

Church leaders concluded that a bank in Kirtland would help solve their cash flow problems (Partridge, 1871-72; Hill et. al., 1976-77). A bank would enable them to turn the church’s assets, land, into money in order to pay debts. Many of the saints had the same cash flow problems as Joseph and the Church. It was hoped that the bank would help them as well.

Of course, Joseph also hoped that the bank would serve as a mechanism for the Church to earn some money. Anyone starting a bank had that expectation. The question is whether or not Joseph intended to dishonestly make money. Was he trying to bleed as much money as possible out of the bank before it failed?

There is strong evidence that Joseph had only honest and honorable intentions. Joseph was the second largest shareholder (Backman, Milton V., Jr., The Heavens Resound: A History of the Latter-day Saints in Ohio, 1830-1838 [Salt Lake City: Deseret Book Company, 1983]). He paid more per share than 85% of the subscribers (Sampson, D. P., and L. T. Wimmer [1972] “The Kirtland Safety Society: The Stock Ledger Book and the Bank Failure.” BYU Studies, 12). This means he had more at stake in the success or failure of the Safety Society than almost everyone else. Failure would incur great losses for him.

Joseph increased his subscription when the Safety Society was in serious trouble (Sampson, 1972). In March and April, when a dishonest speculator would have taken what he could and jumped ship, Joseph increased his financial investment in an effort to help support the Safety Society. Furthermore, he took out three loans on behalf of the Safety Society (Backman, 1983) and sold personal property for $5000 for further support (Ibid.). Joseph lost a significant amount of money during the failure of the bank. This is not consistent with a dishonest business endeavor. On the contrary, it suggests an interested investor trying to make his enterprise succeed.

Joseph Smith deceived people about the amount of specie the Safety Society held. One example of such a salacious accusation:

Lining the shelves of the [Kirtland Safety Society] bank vault . . . were many boxes, each marked $1000. Actually these boxes were filled with “sand, lead, old iron, stone, and combustibles” but each had a top layer of bright fifty-cent silver coins. Anyone suspicious of the bank’s stability was allowed to lift and count the boxes. “The effect of these boxes was like magic,” said C. G. Webb. “They created general confidence in the solidity of the bank, and that beautiful paper money went like hot cakes. For about a month, it was the best money in the country (Wyl, Wilhelm, Mormon Portraits Volume First: Joseph Smith the Prophet, His Family and Friends [Salt Lake City: Tribune Printing and Publishing Co., 1886]).

This claim can be easily discounted. Firstly, Safety Society notes started trading at significant discounts within two weeks of opening day, not a month as Webb said. Secondly, if Webb was aware of this fraudulent behavior, whydid he wait until after the Safety Society failed to say anthing? Finally, the claim is impossible. The bank “vault” was a safe measuring 25 inches by 24 inches by 29 inches (Anderson, 1989). There was not sufficient room for the number of boxes suggested by Webb’s account. The safe was sufficient for the $21,000 the Safety Society actually had, and little else.

The Safety Society was illegal, and Joseph Smith knowingly broke the law. For years, critics of the Church have enjoyed claiming the Safety Society was illegal, and therefore Joseph Smith broke the law. Church apologists have been able to do little to answer this criticism. The judgment of an Ohio court that Joseph Smith and Sidney Rigdon were guilty of unauthorized banking has seemed to serve as conclusive evidence. It is not.

An almost amusing claim by some critics is that the Safety Society was a wildcat bank. It seems likely this claim is based on the expectation that most readers today don’t know what a wildcat bank was, and therefore will be unable to refute the claim. The claim is wholly false. A wildcat bank was an enterprise intended only for defrauding the public. The operators would open for business, accepting deposits of specie and issuing bank notes in return. They would print more notes and they would buy goods as they wished. Their a priori plan was to disappear with their goods and stolen specie. The name “wildcat” came from the fact that the bank offices were often located in out of the way places, difficult to find. Only the wildcats could go there.

The Safety Society office was down the street from the Kirtland Temple, a block from Joseph Smith’s house and across the street from Sidney Rigdon’s. If Joseph and Sidney were trying to make the office difficult to find, they did a pretty poor job.

In October 1837 Joseph Smith and Sidney Rigdon were found guilty of unauthorized banking and fined $1000 each. They paid the fines and appealed the verdict. Unfortunately, they were forced to leave Ohio for the safety of their lives before the appeal could be heard. Because of the conviction, however, it is usually concluded the Safety Society was illegal. Critics further charge that Joseph knowingly broke the law. This charge is false. The Safety Society was not illegal. It was legal. The court got the law wrong. Joseph Smith and Sidney Rigdon were charged and convicted under an Act passed in 1816. It defined a bank as any institution performing banking functions, such as issuing notes for circulation. The Safety Society issued notes for circulation. It was therefore a bank. The 1816 Act makes operating a bank without a bank charter illegal. The Safety Society didn’t have a charter, so it was therefore illegal under the 1816 Act.

The key here is that the 1816 Act wasn’t in force in 1837. The following argument will establish this fact. On January 1, 1823, the Ohio legislature, by resolution, formed a Committee of Revision. The committee’s mandate was to review all laws of Ohio of a general nature, draft revisions and new statues as necessary, and discard those statutes that ought to be discarded. The 1816 Act was discarded by the committee, and a new statute was drafted in its place. The committee completed its work in 1824. Based on the committee’s work, the government published a revised code of Ohio. The 1824 revised code of Ohio would therefore include all statutes in force in Ohio. It did not include the 1816 Act. It did include the replacement drafted by the committee. Legal opinion at the time leaned strongly to the belief that the 1816 Act wasn’t in force. Consider these two excerpts from the Painesville Republican:

It is doubted however, by good judges, whether the law to which we have alluded, is not in force, or if in force, whether it is not unconstitutional and therefore not binding upon the people (vol. 1 no. 10, Thursday, January 19, 1837).

This second is from a letter to the editor, undoubtedly written by a lawyer:

The law of 1816 . . . has long since become obsolete and inoperative. . . . The law of ’16 against private banking . . . was rejected by the [Committee of Revision] and was not republished by the legislature. . . . We must suppose the legislature regarded the law of 1816 as not in force, and hence they did not publish it with their revised code (vol. 1, no. 14, Thursday, February 16, 1837).

The Committee of Revision drafted a statute to replace the 1816 Act, which was adopted by the government in 1824 (1824 Act). This Act did not make banking without a charter illegal. The only legal consequence of circulating notes from a bank without a charter was that such notes were deemed null and void in the courts. There is no prohibition against issuing and circulating these notes and no penalty for officers of unchartered banks. Under the 1824 Act, the Safety Society was legal.

There is further evidence the 1816 Act was not in force. The Kirtland Safety Society was not the first bank to operate without a charter. There were many other institutions in Ohio at the same time issuing bank notes without government authorization (see Backman, 1983; Hill et. al., 1976). These included insurance companies, savings institutions, the rather prominent Ohio Railroad Company, and the Granville Alexandrian Literary Society. This last one even paid taxes levied only on banks. The remarkable point is, however, that none of these were prosecuted. They weren’t prosecuted because they were not illegal.

So what happened to the 1816 Act? There was not specific act of the legislature repealing it. This question was answered by the courts. The 1824 Act was repealed in 1839, well after the Safety Society existed. Subsequently, an Ohio court explained that the 1824 Act had suspended the operation of the 1816 Act (Johnson v. Bently 16 Ohio 97, 1847 WL 17 [Ohio]).

In summary, the legal evidence is as follows. A committee formed by the State legislature discarded the 1816 Act and drafted the 1824 Act in its stead. The 1824 Act was accepted by the legislature. The 1824 Revised Code of Ohio included the 1824 Act, but not the 1816 Act. The opinion of many lawyers and judges was that the 1816 Act was not in force. A court explained that the 1824 Act suspended the 1816 Act. Based on this evidence, we may conclude the 1816 Act was not in force in 1837. Therefore, the Safety Society was legal, and Joseph and Sidney should not have been convicted and fined.

Joseph Smith prophesied the Kirtland Safety Society would succeed, and it didn’t. The failure of the Safety Society proves Joseph Smith wasn’t a prophet. These two assertions will be looked at carefully.

1. The first is false. Joseph Smith never made any such prophecy. If there is such a revelation in favor of the Safety Society, no one has ever seen it except for the one man who claimed he heard it once somewhere. He was Warren Parrish, an apostate.

On February 22, 1838, the Painesville Republican published a letter from Warren Parrish, in which he wrote:

I have listened to him with feelings of no ordinary kind, when he declared that the audible voice of God instructed him to establish a Banking-Anti Banking institution, which like Aaron’s rod should swallow up all other Banks . . . and grow and flourish and spread from the rivers to the end of the earth, and survive when all others should be laid in ruins.

This claim is rubbish, and Warren Parrish was obviously a liar. In the same letter, Parrish claimed he had heard Joseph Smith say, “that man has no more agency than a wheelbarrow, and consequently is not accountable, and in the final end of all things no such principle will exist as sin.” Anyone familiar with Joseph’s teachings knows this is not what Joseph would have taught.

The revelatory experience that Parrish was likely referring to was recorded by Wilford Woodruff in his journal on January 6, 1837:

I also heard President Joseph Smith Jr. declare in the presence of F. Williams, D. Whitmer, S. Smith, W. Parrish & others in the Deposit Office that he had recevied that morning the Word of the Lord upon the subject of the Kirtland Safety Society. He was alone in a room by himself & he had not only the voice of the spirit upon the subject but even an audible voice. He did not tell us at that time what the LORD said upon the subject but remarked that if we would give heed to the commandments the Lord had given this morning all would be well (Jessee, Dean C., “The Kirtland Diary of Wilford Woodruff.” BYU Studies 12).

Joseph made reference to this revelation again, in a church conference on September 3, 1837. He remarked how he “had always said that unless the institution was conducted on righteous principles it would not stand” (Roberts, B. H., Comprehensive History of the Church of Jesus Christ of Latter-ay Saints, vol. 1 [Salt Lake City: Deseret

Book Company, 1930]). That prophecy came true when the Safety Society failed two months later, in November (Ibid.).

2. The second assertion indicates a basic misunderstanding of the calling of a prophet. While we may expect that the prophet is entitled the Lord’s inspiration in many of the prophet’s undertakings, the Lord does not provide direct revelation on every matter that comes before the prophet. The Safety Society wasn’t based on revelation. There was no direction from the Lord to establish it. Joseph Smith did not organize the Kirtland Safety Society in his capacity as a prophet. The Safety Society was therefore like any other business venture in Kirtland. It was certainly capable of failure. We Latter-day Saints should not ever regard our leaders as infallible, and this includes the prophet Joseph. The failure of the bank has no bearing on Joseph’s calling as prophet. Furthermore, as will be established, the failure had nothing to do with Joseph Smith or Sidney Rigdon. The Safety Society failed because of the poor use of the agency of others.

Joseph Smith caused the failure of the Safety Society through his reckless printing of bank notes. Critics have claimed that Joseph Smith printed exorbitant amounts of bank notes, far in excess of what the Safety Society could reasonably support. This claim is also false.

While we do not know for certain the total amount of money printed in notes, Hill et. al. usedthe serial numbers on surviving notes with statistical techniques to estimate the amount. By their estimat, about $100,000 (face value) of notes was printed. That number alone does not tell us whether the amount was unreasonable. What matters is the reserve ratio. The Safety Society had a reserve of hard money of about $21,000 (Sampson, D. P., and L. T. Wimmer, “The Kirtland Safety Society: The Stock Ledger Book and the Bank Failure.” BYU Studies 12). This means the Safety Society ad a reserve ratio of 21%. For comparison, we can use the largest bank in Canada, the Royal Bank of Canada. At the end of 2008, it had a reserve ratio of 3%. It should be noted that these was during a time of severe economic uncertainty, which teh Royal Bank has weathered very well. That the Royal Bank functions that well with a reserve ratio that low is suggestive that the Safety Society’s reserve ration of 21% is reasonable. Furthermore, the Safety Society’s notes traded at a sizeable discount. By the time the full $100,000 was put in circulation, their market value would have been about $15,000. This means that in real terms the reserve ratio was 140%. I conclude that Joseph Smith and Sidney Rigdon managed the printing of bank notes well, and this did not contribute to the Safety Society’s failure.

#The Actual Causes of the failure of the Kirtland Safety Society

One suggestion has been the 1837 banking panic and depression. This cannot be the direct cause. The banking panic began in May in the eastern states. It reached Ohio some time after May (Partridge, 1971-72). The Safety Society’s troubles began in

January, months before the banking panic. Although the Safety Society likely would have failed in the banking panic regardless of other circumstances (as did a great many banks), the banking panic is not the direct cause of the Safety Society’s failure.

Another common suggestion is that the Safety Society’s lack of a charter resulted in people’s having no confidence in the Society’s bank notes so that they would not circulated them. This conclusion can also be discarded. The notes did circulate much better than would be expected. Also there were many other institutions in Ohio, contemporary to the Safety Society that were operating successfully without a charter. Why should this factor be fatal to the Safety Society and not to the other banks? One may well argue that this cannot be the cause.

There are two valid causes of failure:

1. The first was a bank run. Soon after the Safety Society began operation, antagonists of the Church collected as many of its bank notes as they could and attempted to redeem them for specie (Backman, Milton V., Jr., The Heavens Resound: A History of the Latter-day Saints in Ohio, 1830-1838 [Salt Lake City: Deseret Book Company, 1983]). The Safety Society was unable to do it. To have done so would have depleted its reserves and destroyed its viability. It therefore had to stop redemption of notes for specie. This should not be attributed to mismanagement by Joseph Smith and Sidney Rigdon. Banks in smaller communities such as Kirtland had a weakness—their assets were illiquid. Their loans were long-term and their debts, bank notes, were short-term. When attempts were made to redeem the notes, the average state bank couldn’t turn its assets into cash fast enough to meet demand (Kroos, Herman E., American Economic Development [Englewood Cliffs, N. J.: Prentice-Hall, 1955]).

The refusal to redeem notes severely sapped confidence in the notes. Bank notes derived their value from the ability to turn them into specie. Bank notes will circulate only so long as people are confident in their continued circulation. Without the ability to redeem them, there would be significant doubt that others would accept them as money. Safety Society bank notes quickly began circulating at significant discounts.

2. Warren Parrish was the second cause of the failure of the Safety Society. Parrish was a teller, secretary, and cashier of the Safety Society. He had participated in Zion’s Camp and was a member of the first quorum of the seventy (Smith, Joseph, History of the Church of Jesus Christ of Latter-day Saints, ed. B. H. Roberts, vol. 2 [Salt Lake City: Deseret Book Company, 1930]). Joseph Smith noticed taht money went missing when only Parrish had access to it (Roberts, B. H., Comprehensive History of the Church of Jesus Christ of Latter-day Saints, vol. 1 [Salt Lake City: Deseret Book Company, 1930]). Joseph was confident that Parish was keeping it in a certain trunk. Joseph sought a warrant to search the trunk, but by the time the warrant was granted, Parrish had moved the trunk to an unknown location. We do not know whether the money was in the trunk or not. Heber C. Kimball recorded, however, that Parrish later admitted to embezzling $20,000 (Sampson, D. P., and L. T. Wimmer, “The Kirtland Safety Society: The Stock Ledger Book and the Bank Failure.” BYU Studies 12). This would have been disastrous for the Safety Society. With $20,000 in stolen notes, Parrish could theoretically have drained all but $1000 of the Safety Society’s reserves. That theft, by itself, could have brought down the Safety Society.

Embezzlement was not the only indiscretion by Warren Parrish. As recorded by George A. Smith (Ibid.):

Warren Parrish was the teller of the bank, and a number of other men who apostatized were officers. They took out of its vault, unknown to the President or cashier, a hundred thousand dollars, and sent their agents around among the brethren to purchase their farms, wagons, cattle, horses, and every thing they could get hold of. The brethren would gather up this money and put it into the bank, and those traitors would steal it and sent it out to buy again, and they continued to do so until the plot was discovered and payment stopped.

Joseph Smith warned that if the Safety Society was not conducted on the basis of righteous principles, it would not stand. Given the dishonest and fraudulent behavior of Warren Parrish and others, it could not have survived.

Warren Parrish apostatized. He was a member of the group that, during Sunday Service in the temple, rose up with pistols and bowie knives and attempted to drive the saints from the temple.

In a thoughtful article (The Failure of the Kirtland Safety Society,” BYU Studies 12:4 [1972]), Scott H. Partridge has pointed out that opening a bank in the United States in the 1830s was risky business because of the difficult economic climate, and half of them eventually failed. He wrote:

Even a casual student of Mormon history must admit that the early leaders of the Church undertook tasks that “good judgment” would have cautioned them not to undertake. The sending of missionaries to England during the darkest hour of persecution; the building of the Kirtland Temple; the establishment of Nauvoo and the construction of its temple; the long trek west to the Rocky Mountains; the establishment of a viable independent economy in the isolation of Utah Territory—all were actions that more timid souls would not have undertaken. [The] . . . willingness to take great risks in the hopes of great gains was a characteristic pragmatic philosophy. . . [The saints] . . . tried new things and . . . turned to other programs when failures occurred. The historian can logically judge that the establishment of the Kirtland Safety Society was the result of poor judgment, but at the same time should acknowledge that given more favorable economic conditions it might well have succeeded—as did other even more difficult undertakings attempted by the early Mormon leaders. The establishment of the Kirtland Safety Society was one of many activities undertaken with the goal of establishing Mormonism on a solid footing in Western America. That it [the Kirtland Safety Society] should fail given the circumstances is not particularly surprising. What is important is that after its failure, those responsible recognized their failure and tried again in other ways.