The failure of the Kirtland Safety Society in 1837 was one of the darkest times in the history of the Restored Church with a third of Church leadership apostatizing, along with an eighth of the Church membership.
In Q&A format, this video dispels unfounded rumors hurled against the Prophet Joseph Smith and clarifies the circumstances leading to the failure.
Okay. On this video, I wanted to talk about the Kirtland Safety Society. There’s a lot of misconceptions about this, even members of the church are really confused by this period in our history that was a very dark time. Tremendous apostasy that occurred, especially with the leaders of the church and we’ll talk about that. But there’s four big things that are often talked about with this. The failure to prove that Joseph was not a prophet, that Joseph was trying to deceive by doing this, that Joseph operated an illegal operation and knew he was doing that, and then that the failure was due to Joseph recklessly printing bank notes.
We’ll be talking about that. And I wanted to do this video, maybe more of a Q&A kind of format. Here’s a question and then I’ll give some thoughts on it. First of all, why did the saints set up a bank in the first place? Well, this was in the infancy of the economy in the United States. There were frontier banks popping up in different places to help the economies move. There was really a lot of illiquid assets with land being the main asset. Kirtland was growing like crazy. It had doubled in the last two years, so they really needed to have some currency to help the economy to flow and be out of a barter type of system.
I do want to share one quote from the Paynesville Republican Ohio newspaper about the opening of the Kirtland Safety Society in January of 1837. Here it from the paper says, “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.”
Was it legal? Well, they tried to get a charter twice. They were denied. There was some religious persecution, but there was also some fear of banks by some of the people in the legislature at the time, some hard money people that wanted just coins to operate without banks. There’s different things. But even the second time they went back with non members, they weren’t able to get it. They changed it to an anti bank, that’s why you may have heard it referred to an anti bank before, and operated as a joint stock company. Here’s the interesting thing. Critics will point out Joesph Smith and Sidney Rigdon were convicted of operating an illegal bank, or operating a bank without a charter. They were both fined $1000. So, that proves they were guilty, correct?
Well, let me share this with you. This is from R. McKay White and I’m going to put a paper that he did. He is an economist and an attorney. Great combination for addressing this. He did a great paper on the Kirtland Safety Society. I’ll put the link in the resources. But listen to this. He says, “The Committee of Revision [which is in the Ohio legislature] drafted a statute to replace the 1816 Act, and that was what Joseph was convicted under, which was adopted by the government in 1824. 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.”
The prosecutor and the judge actually were both tied to an antagonist of the church, so that can give you a little bit of insight there. The appeal was not heard because the saints were fleeing to Missouri and so it probably would’ve been overturned if it was brought up.
Okay. Was it a wildcat bank? These were banks, no it was not. These were banks that were set up as a makeshift operation and they were a redemption spot for you to redeem, was set out in the sticks somewhere where the wildcats are and it was a fictitious location, essentially it was a defrauding operation. Joseph, the Kirtland Safety Society was set up in the middle of town. Clearly not a wildcat bank. How was it organized and funded? Well, there weren’t any MBAs at that time. Nobody could really have the skills to run the bank, so Joseph and Sidney were just as good as anybody else really to run the bank. It was set up as a joint stock company. There were over 100 shareholders. Even some non members were involved because they thought it was a great idea there, to help the economy there in Kirtland.
Okay. So, was a revelation involved in the founding and was Joseph acting in his capacity as a prophet? Now, this one’s really critical and the answers to both of those are no and no. Let me read these two quotes here. This is an interview with … Or excuse me, this is McKay White in his paper. He says, “The Safety Society wasn’t based on revelation. There was no direction from the Lord to establish it. Joseph Smith did not start it in his capacity as a prophet. The Safety Society was there for like any other business establishment in Kirtland and quite capable of failure. Secondly, Latter-Day Saints do not believe their leaders are infallible. Given the Safety Society was not directed by God and that Joseph Smith was subject to mortal weaknesses and failings, there was always a chance that the Safety Society would not succeed. Failure, however, would have no bearing on his calling as a 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 agency of others.”
Then I wanted to share this from an LDS Perspectives podcast and I’ll link this, Episode 64, Religious and Financial Panic in Kirtland. This is an interview with a historian Elizabeth Kuehn. The question is posed to her, “Is it correct that Joseph Smith prophesied that the Kirtland Safety Society would be successful?”
And she said, “That’s a really interesting question. Technically he did not. Wilford Woodruff records in his journal that on the first day that the notes were available in exchange that Joseph has said that he had a revelation that the bank would be successful if executed on righteous principles. Later in a meeting on September 3, 1837 when John F. Boynton will bring up this very question of, ‘Well, the bank was founded on revelation, how could it fail?’, Joseph will correct him and say, ‘I never said that. I said that it had to be conducted on righteous principles and it was not.’ There is this sense that he’s not only defending the failure of the bank, but also limiting the revelation. This isn’t a continuation of the United Firm. This isn’t something that we have a revelation laying out exactly what they should do. It seems more as if he’s receiving direction to try something out that he, Sidney Rigdon, and others have said. A bank looks really promising. Let’s move forward with this. You kind of get the revelation after the fact saying, ‘Okay, this is what you want to try? Try it. If you function in the way that it’s supposed to, it can be successful.'”
One last quick little side note, it’s kind of interesting, Joseph did say optimistically one time, he thought that notes would be as good as gold someday. Today they actually are. If you go onto eBay and try and buy a note of the Kirtland Safety Society, it’s multiples of the price of gold today. Anywhere typically $3000 to $12,000 depending on different factors for a single note. Okay. Did Joseph try to deceive the people about the amount of coin reserves? Absolutely not. There was a story that’s continued to pass around that they had the chest on banks within the vault that had sand in the chest with silver coins on top. Well, the problem is the vault itself was two foot by two foot by about two and a half feet. It couldn’t have even happened.
Did Joseph recklessly print bank notes? Well, they printed 100,000 bank notes to fund the Safety Society. They had $21,000 in reserve of gold and silver coins. That would be a reserve ratio of 21%, which was considered very good capitalization for a bank. In fact, today the only requirement in the US is 10% there. They also had a lot of land as collateral as well, so absolutely not. Why did it fail then? Well, some people point to them not having a formal charter and others operated banks without that and many … They weren’t persecuted or prosecuted like Joseph was, we already talked about. But I would say that had a limited impact. It might’ve created a concern for using the notes by people.
The panic of 1837 in the US, the land values plummeted. It was a depression. One third of the banks in the United States failed. This, if you talk to people that don’t know a lot of the details about this story, this is what they pin it on. It certainly helped to finish off the bank, but the bank really fell apart before this took hold and it fell apart in the first few months particularly. The biggest components was an antagonist and an apostate. Those two. The antagonist was Grandison Newell. He was a competitor of lots of different businesses with those in Kirtland, the neighboring town of Paynesville. He went out and they were trying to buy up every note that they could get on this and then they would go in and try and redeem it for … they call it specie, but for the coins to try and wipe out their reserves.
This was driving down the value of the notes and so they could buy up even more. Sidney Rigdon panicked, closed the bank literally for 24 hours, didn’t know what to do. Joseph was out of town at this moment. And that helped also to lower the confidence in the bank. You had the saints then, John Johnson panicked. He sold a bunch of the land that was being used for collateral. The saints wouldn’t take, many of the merchants wouldn’t take the notes for doing business. Many of the people that had pledged to contribute for the stock to fund the company would not pay their commitments for this. So, it was really, it was a domino effect that started from Grandison Newell. He accomplished was he was trying to do. There was another very bad thing that happened within the bank and it was from Warren Parish who became a bitter apostate and he later admitted to Heber C. Kimball that he actually had embezzled $20,000. Joseph claimed that he noticed that whenever Warren was involved with just … if it was just Warren involved with the money, that money would come up missing.
And there was trunk there, and by the time he was able to get a search warrant to look in the trunk, the trunk disappeared and was gone. So, that also helped to wipe out the reserve. So, those are the reasons why it really did fail. Did Joseph lose anything? Well, look at the screen here. Joseph Smith was, along with three others, the largest shareholder of the Safety Society. All else equal, he would stand to lose the most if the Safety Society failed. He also paid more per share than 85% of the shareholders. If he was in it for the money, he would have gotten out at the first signs of trouble. Instead, while the Safety Society was really struggling, he increased his subscription in order to try to help the Safety Society succeed. That wasn’t all. He took out three loans on behalf of the Safety Society to give some added liquidity and then finally he even sold additional $5000 in personal property in order to give more rescue help.
Okay. How many apostatized from this? Well, this could be a whole nother story on its own, but this was a nightmare. I won’t go into all the detail, but Joseph wrote in his journal, “It seemed as though all the powers of earth and hell were combining their influence in an especial manner to overthrow the church at once and make a final end.” One third of the leaders of the church apostatized through this. In fact, they tried to start up their own organization, which failed. And then about an eighth of the church members failed. It was in this point that Joseph sent out some of his best brethren out to mission to Britain. That really saved the church as they moved later to Nauvoo and brought in a lot of new members and leaders there. I talked about that in a separate video, too.
Why would Joseph send off some of his greatest when he needed them the most? Okay. What are some lessons from this? Well, Milton Backman wrote in the Ensign an article called A Warning from Kirtland. I’ll link to this. But he said, “Saints who look back on this period learned some compelling lessons on which we today need to be aware. One of the pointed lessons we learned from the Kirtland apostasy is that no one should consider himself secure from the loss of faith, pride, criticism, speculation, envy, greed. These are enough to cause the most faithful to stumble. Parley P. Pratt, for example, declared that envyings, lying, strife, and divisions caused trouble and sorrow in Kirtland. He admitted that he was a victim of these failing.
But the lord knew his faith, his integrity of purpose, and helped him in his victory against an opposing spirit. Orson Hyde recalled that because he acted foolishly during this period of darkness, he temporarily lost the light of the Holy Ghost. Luke S. Johnson admitted that his mind became darkened and he neglected his church responsibilities after he had partaken of the spirit of speculation.
So, in conclusion I wanted to just put on the screen three paragraph summaries of almost everything I talked about here that you can look at if you like. I hope you enjoyed the video and subscribe for more. Thanks.
LDS Perspectives Podcast Episode 64: Religious and Financial Panic in Kirtland – Elizabeth Kuehn http://www.ldsperspectives.com/2017/1…
Fairmormon responses about Kirtland Safety Society: https://www.fairmormon.org/answers/Mo…
Ensign Article, Apr 1989 – A Warning From Kirtland, by Milton Backman Jr https://www.lds.org/ensign/1989/04/a-…
Kirtland Safety Society paper by R McKay White- The Kirtland Safety Society: The Myths, the Facts, and the Prophet’s Good Name: https://www.fairmormon.org/wp-content…
Latter-day Saints’ Q&A is a video series not produced by The Church of Jesus Christ of Latter-day Saints, but by me, an ordinary member of The Church of Jesus Christ of Latter-day Saints, an independent voice, with a passion for studying Church history and defending the faith. In this series, I provide evidences for the restoration, and address tough questions posed by critics of the Church of Jesus Christ of Latter-day Saints, offering faithful answers based on accurate research and historical references which will be posted at the end of each video.