Kirtland Safety Society

In late 1837 as membership in The Church of Jesus Christ of Latter-day Saints reached thousands, new converts gathered to Missouri and Kirtland, Ohio. Given the sizeable population around Kirtland, a bank was desperately needed to serve the credit needs of the growing community. Orson Hyde[?] went to the Ohio legislature to request a bank charter while Oliver Cowdery[?] went to Philadelphia to acquire plates at considerable expense to print notes for the bank.

To the dismay of the Kirtland community, the Ohio legislature rejected Hyde's request even after a second attempt in February 1838 was joined with a petition from several non-Mormons for a bank with less capital stock. Anti-banking politicians who were in control of the legislature were much more restrictive in issuing bank charters than the previous legislative body, although the rejection is also attributed to political and religious differences. For example, Grandison Newell, an antagonist to the Church and Joseph in particular, instigated vexatious lawsuits against the Mormons of Ohio. Grandison was also close to three legislators who had taken the charter-requests under consideration and 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 as a joint stock company, a type of legal entity whose supposed limited financial privileges were being vigorously debated in Ohio at the time. 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 and Joseph Smith as cashier.

In anticipation that a charter would eventually be granted, the KSSABC began issuing notes. However, even before the second attempt to acquire a charter and at the behest of Grandison Newell, Samuel D. Rounds swore a writ against Joseph Smith and Sidney Rigdon for illegal banking and issuing unauthorized bank paper. This trial was postponed until October. In the meantime, despite Joseph Smith's strong admonitions to the Kirtland community against speculation, the KSSABC failed due primarily to speculation and insolvency (most of the KSSABC reserves were tied up in land rather than liquid silver as some erroneously believed) as bank failures across the nation spread to Ohio. Joseph took out loans from other banks and sold personal property to shore up the KSSABC, but finally resigned from the KSSABC and disposed of his interests in it in early 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 and charged with the responsibility of winding down the KSSABC' business.

The previous month in October, the court adjudicated the case against Smith and Rigdon (neither of whom appeared at the trial) and fined them each $1,000 plus court costs under an 1816 law. They appealed the case later on the grounds that the the KSSABC was an association and not a bank, but since Smith and Rigdon later left Ohio in December to avoid the threat of heightened persecution, the appeal was never decided. Oddly enough there were a number of large firms in Ohio structured similar to the KSSABC which had issued notes and were not subject to litigation under the 1816 law which some argued was not in force, internally inconsistent, obsolete and inoperative and implicitly repealed by the act of 1824.

Greedy and speculative members (including church leaders) and non-members alike blamed Joseph for their losses although some later apologized in blaming Joseph for their own mistakes despite Joseph's warnings against speculation and his efforts to keep the bank solvent especially since he had as much or more at stake in its success as any other shareholder. Joseph vigorously opposed claims that the KSS was created for the purpose of enriching the members, but many disaffected members felt to the contrary. Many members including church leaders were cut off from the LDS Church for apostasy surrounding this incident. Those who remained faithful moved to join the main body of the members in Missouri.