Kirtland Safety Society

The Kirtland Safety Society (KSS) was a quasi-bank organized in 1836 (and reorganized on January 2, 1837) by leaders and followers of the Church of Jesus Christ of Latter Day Saints. According to KSS' 1837 "Articles of Agreement", it was intended to serve the banking needs of the growing Mormon community in Kirtland, Ohio. Its preamble stated it was:

"for the promotion of our temporal interests, and for the better management of our different occupations, which consist in agriculture, mechanical arts, and merchandising"

However, by November 1837, KSS failed and its business closed. Critics have charged that the KSS was engaged in illegal, unethical or fraudulant actions nearly from its formation, while others contend such charges are at best inflated and at worse baseless.

Contents

1 History 2 Kirtland Safety Society Notes 3 External links 4 Further reading

History

In late 1836, many recent LDS converts gathered to Missouri and Kirtland, Ohio. Given the sizeable population around Kirtland, a bank was needed to serve the credit needs of the growing community. Although the LDS church owned considerable land, it also needed liquidity to repay its loans. Orson Hyde went to the Ohio legislature to request a bank charter while Oliver Cowdery went to Philadelphia and acquired plates to print notes for the bank.

Hyde returned to Kirtland on January 2 without being able to get any legislator to sponsor a bill to give KSS a bank charter. LDS church president and prophet Joseph Smith, Jr. attributed the lack of sponsorship to discrimination against the Mormons. Hyde returned to the Ohio legislature in February with a petition that was also joined by several non-Mormons for a bank with far less capital stock. This time Hyde secured sponsors which was added as an amendment to another bill. However, the bill was defeated by the Ohio legislature.

Although this rejection is attributed partly to political and religious differences, legislators were much more restrictive in issuing bank charters than the previous legislative body in part because wildcat banking and counterfeiting were endemic problems across the country. Perhaps the most visible example of discrimination against the LDS was Grandison Newell, a professed antagonist to the LDS church in general and its "prophet" in particular. He instigated several lawsuits against the Mormons in Ohio. Newell was close to three legislators who had taken the charter requests under consideration and, he used his influence to dissuade the legislators.

Under the advice of non-Mormon legal counsel, the Kirtland Safety Society Anti-Banking Company (KSSABC) was formed under revised articles on January 2, 1837 as a joint stock company to serve as a quasi-banking institution. "Anti" and "ing" were engraved before and after "Bank"--in smaller typeface--on the printing plates Cowdery had purchased in Philadelphia.

Quasi-banks operated as banks (sometimes in conjunction with other business activities) although they had no formal bank charter. Quasi-banks were not uncommon in their time because of lax banking regulations throughout the country. Whigs went so far as to encourage businesses to operate as quasi-banks. Even after the national bank failure in 1837, there was no widespread opposition to quasi-banks in Ohio until 1873. Subscribers and organizers of the KSSABC were members of the Kirtland community (merchants, farmers, etc.), many of whom became shareholders of the company. Sidney Rigdon served as the KSSABC' chairman and president, Warren Parrish as signatory, secretary and teller; Smith was cashier.

Supporters hoped that they would eventually be able to secure a formal banking charter. In the interim, the KSSABC began issuing notes as a quasi-bank in early January 1837. However, in February at the behest of Newell, Samuel D. Rounds swore a writ against Smith and Rigdon for illegal banking and issuing unauthorized bank paper. At a hearing in March, this trial was postponed until Autumn. Eventually Rounds voluntarily dropped all of the cases in his suit except those against Smith and Rigdon although Smith's only official capacity for KSSABC was cashier and other officers and parties with equal or greater responsibility were absolved from the suit. KSSABC continued issuing notes through June, but eventually failed due to insolvency (most of the KSSABC reserves were tied up in land rather than liquid silver as some erroneously believed).

The KSSABC failure was aggravated in part by the national bank crisis (the Panic of 1837) that began in New York the month before. Smith transferred all of his holdings to Oliver Granger and J Carter in June and resigned from the KSSABC in July. Parrish and Frederick G. Williams assumed management of the KSSABC from then on until it closed its doors in November with about $100,000 in unresolved debt. Smith appointed Granger as his agent to clear up his Kirtland affairs as Smith was named in seventeen lawsuits with claims totalling $30,206.44 over debts incurred in the failure of the KSSABC. According to LDS scholars, "Four of these suits were settled; three were voluntarily discontinued by the plaintiffs; and ten resulted in judgments against Joseph Smith and others. Of these ten judgments, three were satisfied in full, three were satisfied in part, and only four were wholly unsatisfied." The LDS church also raised and put up $38,000 in bail money for Smith at the Geauga County Court which was to be held to satisfy any judgment that might be rendered against Smith.

On July 28, Smith, Rigdon and Thomas B. Marsh headed to Ontario, Canada on church business and returned in late August. On September 27, Smith and Rigdon departed Kirtland for Missouri. They arrived about one month later, spent about two weeks in Missouri on Church business and returned to Kirtland on December 10. In their absence in October they were fined $1,000 for operating an illegal bank although other, larger quasi-banks had been operating in Ohio longer than KSSABC and were not being prosecuted.

Among KSSABC's misfortunes, Smith also accused Parrish of embezzling $25,000 from KSSABC. In June Smith sought, but was denied, a search warrant to confirm his suspicions against Parrish.

Many LDS (including Church leaders) became disaffected with the Church and Smith in the wake of KSSABC's failure and left the Church or were disfellowshipped or excommunicated like Cowdery was in 1838 primarily for accusing Smith of a "dirty, nasty, filthy affair" with Fanny Alger, Smith's first plural wife. In May of 1837, disgruntled LDS (including Church leaders) and non-members alike began to publicly blame Smith for their losses. Some LDS, like Parley P. Pratt and Cowdery were later reconciled to Smith and the Church.

Smith warned the community against speculation and counterfeiting. Shortly after his resignation from the KSSABC in July he stated in the August 1837 Messenger and Advocate:

"I am disposed to say a word relative to the bills of the Kirtland Safety Society Bank. I hereby warn them to beware of speculators, renegades and gamblers, who are duping the unsuspecting and the unwary, by palming upon them, those bills, which are of no worth, here. I discountenance and disapprove of any and all such practices. I know them to be detrimental to the best interests of society, as well as to the principles of religion."

Shortly before his resignation, Smith also took out a $1,225 loan from a separate bank to help keep KSSABC solvent. Smith publicly denied claims that the KSSABC was created for the purpose of surreptitiously enriching the LDS leadership, but many disaffected members felt otherwise even though Smith risked losing as much or perhaps more than anyone else due to KSSABC's failure.

Regardless of the reasons for the KSSABC's failure, much of the blame was laid upon Smith. Half of The Quorum of Twelve Apostles accused Smith of improprities in the banking scandal, and LDS Apostle Heber C. Kimball later said that the bank's failure was so shattering that afterwords "there were not twenty persons on earth that would declare that Joseph Smith was a prophet of God." [1] (http://www.utlm.org/onlinebooks/trackingch7.htm) Warren Parrish, a KSABC officer who later apostatized claimed that Smith had prophesied that KSSABC "shall become the greatest of all institutions on EARTH." 1837.) [2] (http://www.utlm.org/onlineresources/josephsmithsbank.htm) Wilford Woodruff's diary confirms this in partial detail. Woodruff records that Smith had a revelation on the topic, but declined to share it, saying only that "if we would give heed to the commandments the Lord had given this morning all would be well." It is then Woodruff who expresses his own hopes that the KSSABC will "become the greatest of all institutions on EARTH." (see The Kirtland Diary of Wilford Woodruff by Dean C. Jessee Fn, BYU Studies, vol. 12 (1971-1972), Number 4 - Summer 1972, p. 381.)

On January 12, 1838, faced with a warrant for his arrest on a charge of illegal banking, Smith and Rigdon fled to Clay County, Missouri just ahead of an armed group out to capture and hold him for trial. Smith and Rigdon were both acquainted with conflict and violent mobbing they experienced together in Pennsylvania and New York. Anticipating more of the same, in Smith's words, they left "to escape mob violence, which was about to burst upon us under the color of legal process to cover the hellish designs of our enemies." Brigham Young left Kirtland for Missouri weeks earlier on December 22 to avoid the dissidents who were angry with Young and threatened him because of his persistent public defense of Smith's innocence. Most of those who remained committed to the church moved to join the main body of the LDS in Missouri.

Kirtland Safety Society Notes

One of the tangible connections from this episode to the present are the notes that were printed at the time. Some church leaders encouraged people to hold onto these notes as they said that someday they would have value again. While the notes never regained their face value, they are now collector's items worth many hundreds of dollars. Part of their value is attributable to the fact that most, if not all, of the notes have Joseph Smith's signature on them.

Images of some of these notes are available at MormonMoney.com (http://www.mormonmoney.com) under the Early Utah/Resigned Kirtlands heading.

External links

• Wade Englund's apologetic response to the Tanners' claims of wrongdoing surrounding the Kirtland Safety Society:
  • Counterfeiting, indictments and bogus-making (introduction) (http://www.aros.net/~wenglund/chapt35.htm)
    • Speculation (http://www.aros.net/~wenglund/35endnote.htm)
    • Failure of the Kirtland Safety Society (http://www.aros.net/~wenglund/35endnote2.htm)
    • Bankruptcy and Fraud (http://www.aros.net/~wenglund/35endnote3.htm)
    • Chronology of the Kirtland Safety Society (http://www.aros.net/~wenglund/35endnote5.htm)

Further reading

• The Kirtland Safety Society: The Stock Ledger Book and the Bank Failure by D. Paul Sampson and Larry T. Wimmer, BYU Studies 1972, Vol. 12, No. 4, p.427.
• The Failure of the Kirtland Safety Society by Scott H. Partridge, BYU Studies 1972, Vol. 12, No. 4, p.437.
• The Waning of Mormon Kirtland by Davis Bitton, BYU Studies 1972, Vol. 12, No. 4, p.455.
• The Kirtland Economy Revisited: A Market Critique of Sectarian Economics by Marvin S. Hill, C. Keith Rooker, and Larry T. Wimmer, BYU Studies 1977, Vol. 17, No. 4, p.389.
• Chartering the Kirtland Bank by Dale W. Adam, BYU Studies 1983, Vol. 23, No. 4, p.467.
• Chapter 35 of Mormonism, Shadow or Reality by Jerald and Sandra Tanner, Utah Lighthouse Ministry 1964, ISBN 9993074438.