Documents, Volume 5, Part 5 Introduction: 5 October 1836–10 April 1837
Part 5: 5 October 1836–10 April 1837
From fall 1836 to early spring 1837, JS and other leaders focused on developing the town of , Ohio, and finding means to pay church debts. JS
was involved in several large land transactions and, according to
extant records, purchased about 440 acres in fall 1836. A primary
motivation for these acquisitions was expanding the amount of land
the church had available for newly arriving members to
purchase.
Some of these purchases may also have acted as financial security
for JS’s other major endeavor in this period, the . An
ambitious endeavor, the Safety Society was never able to realize its
founders’ aspirations because of the insurmountable obstacles it
faced, including underfunding, opposition, the lack of a bank
charter, and the financial panic of 1837.
JS and other church leaders in began making plans for a bank in October 1836.
By mid-October they had chosen the name of the institution, the
Kirtland Safety Society Bank, and had begun taking subscriptions for
stock. On 2 November
1836 the stockholders met and ratified the Kirtland Safety Society’s
constitution. Thirty-two stockholders were then elected
as bank directors, likely at this same meeting, and they elected two
primary officers for the society, as
president and JS as cashier.
, like
many other states, required parties intending to establish a bank to
petition the state legislature for an act of incorporation. If
approved, the bank would receive a charter granting it banking
privileges. After the 2 November organization of
the Safety Society,
was assigned to go to , Ohio, where
the legislature met, to find a politician willing to present the
society’s petition for a charter. Although the Kirtland Safety
Society directors may have hoped for a quick approval, Hyde was not
able to find a legislative sponsor until February 1837. In the meantime, JS, , and the society’s stockholders reorganized their
institution on 2 January 1837. They restructured the society as an
unincorporated bank, renamed it the Kirtland Safety Society
Anti-Banking Company, and drafted new articles
of agreement to replace the original constitution. This change in structure led to new titles
for the society’s officers: Rigdon became the secretary and JS the
treasurer. After this reorganization, the society conducted banking
services in an unofficial capacity while Hyde continued pursuing a
bank charter.
A record of loans from the institution bears the date of 7 January, but the
institution may have opened for business as early as 4 January, the
date found on the earliest extant Kirtland Safety Society
notes. When individuals
took out a loan, they received the amount borrowed in the form of
Kirtland Safety Society notes. The clerks and officers of the society also
exchanged the society’s notes for the notes of other banks, thereby
increasing the circulation of the society’s notes and its financial
reserves. According to
the extant records, most of the individuals involved in financial
transactions with the Kirtland Safety Society were residents, along with a few people from and . Nearly all stockholders and loan recipients
were church members.
After opening in early January, the Kirtland Safety Society quickly garnered
both popular interest and hostility. Contemporary and reminiscent
accounts indicate there was general acceptance and circulation of
the society’s notes in the first weeks of the institution’s
operation. Early on, however,
several newspapers concentrated on the solvency of the institution.
Editors for the Cleveland Gazette expressed surprise
at “the readiness with which these anti-banking bank bills are thrown into circulation without any evidence or knowledge
of the solvency of the issues” and considered it “a most
reprehensible fraud on the public,” since “as far as we can learn
there is no property bound for their redemption, no coin on hand to
redeem them with, and no responsible individuals whose honor or
whose honesty is pledged for their payment.” The Ohio Star, a
Ravenna newspaper that frequently criticized JS and the church, printed an
article warning readers of the “emission of Mormon money, purporting
to be bank paper.” In contrast, a few newspapers defended the
society. Although skeptical about the institution, the editors of
the Painesville Republican wrote in mid-January that
they had been informed that Safety Society officers “have a large
amount in specie on hand and have the means of obtaining much more,
if necessary,” and, if this were the case, the circulation of the
society’s notes “would be beneficial to [the] community, and
sensibly relieve the pressure in the money market.” The editors of the Cleveland
Weekly Advertiser wrote an outright defense of the
society, which they believed was “most shamefully and cruelly
persecuted; whose motives and intentions were totally misconstrued
and misrepresented” by other newspapers, particularly the
Cleveland Gazette.
Newspapers were not the only source of hostility; some individuals in actively campaigned
against the Kirtland Safety Society, with prominent county resident
apparently taking a
lead role.
Amid heightened opposition in late January came rumors that the
Safety Society had closed its doors. It is unclear whether or not
the business did temporarily close, and if it did, what led to the
closure. recounted in his
journal hearing that a mob from was coming to destroy the society’s
office. Though it is not known
whether the mob materialized in , fear of violence may have led the directors to
close the office temporarily. Writing about events at a distance,
the Cleveland Weekly Advertiser described a “furious
and insulting mob” gathering in Kirtland and threatening to destroy
the society. In a July 1837 editorial in the
Messenger and Advocate,
reported that
“hundreds who were enemies, either came or sent their agents and
demanded specie till the officers thought best to refuse
payment.”
Rumors that the society had closed and was refusing to redeem notes for
specie damaged its reputation and led some to assume the worst. In response to the reported closing
of the society’s office, the Cleveland Gazette
announced the failure of the institution, and other papers echoed
this conclusion. Such news may have been
based on false stories devised by opponents to harm the institution
and discredit JS as its officer. If the Safety
Society did close in late January, it was a brief closure, probably
around 23 or 24 January. Even though a few newspapers continued to
insist that it had failed, the society made loans and accepted
payments for stock after January 1837.
The success of the Safety Society was also hampered by the terms of its
incorporation. The articles of agreement set the original
capital stock for the institution at $4 million, a considerably
higher amount than that of other community banks in the period,
which ranged from $100,000 to $300,000. The capital stock was
divided into 80,000 shares of stock valued at $50 each. Stockholders were
required to pay a first installment of twenty-six cents per share of
stock, and these subscription payments were intended to provide the
reserves that would give the society financial stability, allowing
the officers to exchange the society’s paper notes for specie when
customers presented them for redemption. By the beginning of
January, the society had received almost $12,000 in specie or
banknotes, as more than one hundred investors paid some portion of
the first installment due on their stock subscriptions.
It is unclear how many Kirtland Safety Society notes were put in
circulation, but based on banking practices of the time,
the society would have needed enough reserves to repay ten to thirty
percent of the notes it issued, meaning its officers could feasibly
have issued notes for between $40,000 and $120,000.
Nevertheless, the society was significantly underfunded, in large part
because of the small amount that stockholders were required to pay
for their stock. At fifty dollars per share, the price of stock for
the Kirtland Safety Society was lower than average, but not
unusually low when compared with similar financial
institutions. What was substantially reduced for the
society’s stockholders was the amount they were required to pay when
they first subscribed for stock. At twenty-six cents per share, this
initial payment was significantly lower than what other banks or
banking companies charged, which typically required between five and
fifty dollars’ initial payment per share. The
Kirtland Safety Society officers showed leniency to those who could
not pay their full initial payment, and several stockholders made
only partial payments, while a few never paid anything. Individuals who subscribed for one
thousand shares should have made an initial payment of $262.50, but
many with subscriptions of a thousand or more shares of stock only
ever paid a few dollars. The combination of relatively low share
prices, an unusually high capital stock, and a very low initial
installment payment for stock, some of which was never paid, meant
that the society was low on funds from the outset.
JS and other stockholders appear to have obtained
additional funding by taking out loans from two nearby banking
institutions. These loans would not have significantly improved the
society’s solvency but would likely have increased its available
specie, which was needed for the redemption of notes. On 2 January,
JS, , and received a
loan for $3,000 from the in , due in forty-five days. The second loan was taken out on
10 January from the in for $1,200, due in four months. This second loan was
taken out by Reynolds Cahoon, a stock holder in the Safety Society
who may have been working in the Kirtland Safety Society office in
January, as his handwriiting appears in the office’s early
records.
By mid-January, JS, , and managers of the Kirtland Safety Society began
making arrangements to expand its reach outside of . On 14 January the managers signed a contract with David Cartter, a lawyer
in Akron, Ohio, designating him an agent of the society, and later that
month, the officers made business arrangements with the
Bank of Monroe in
Monroe, Michigan. They appear to have
bought stock in the bank and reached an agreement to partner with
its officers, perhaps intending to become a branch of the Bank of
Monroe and act under its charter. In early February, JS, Rigdon, , and traveled
to for a
stockholders’ meeting of the bank. At this meeting, Cowdery was made
vice president and a bank director of the Bank of Monroe. While in Monroe in February,
Hyrum Smith and Rigdon each borrowed notes from the Bank of Monroe,
likely taking these notes back to Kirtland and using them in the
society’s office. By the end
of March the Bank of Monroe suspended specie payments, and it
appears to have failed by the end of the year.
Two events in February significantly affected the development of the
Kirtland Safety Society and its ability to gain public support.
First, brought charges
against JS, , ,
, , and
under an 1816
statute that made it a finable offense for an unchartered bank to
perform banking services, including the issuing of notes. Public understanding of
banking laws in 1837 was muddled, and there was disagreement
regarding the enforcement of the 1816 statute, in large part due to
an 1824 statute that had prohibited lawsuits against the notes of
unauthorized or unincorporated banks. The legal disjuncture between the two
statutes was not formally resolved until 1840. Though
the other four church members were not prosecuted, JS
and Rigdon were tried in absentia in October 1837. In the trials,
“the Court charged the Jury that said Statute was in force,” and JS
and Rigdon were both found guilty according to the Act of 1816 and
fined $1,000 each.
The second significant event in February occurred when Samuel
Medary presented the society’s petition for a bank
charter in the senate. The petition was presented as an
amendment to a bill to create a state bank in Ohio, and some aspects
of the proposal differed from the society’s articles, possibly to
make the legislature more amenable to granting a charter. The most significant change
was a decrease in the society’s capital stock from $4 million to
$300,000, which, although still higher than most, was within the
range of other community banks. The Safety Society’s petition failed
to pass, on a vote of eleven in favor and twenty-four opposed. In fact,
the legislature did not approve the incorporation of a single bank
in its 1836–1837 session. Some banks were approved for a charter by
virtue of being added to the bill for a state bank, but that bill
was not passed until 1845. There were no other documented
attempts to obtain a banking charter for the Kirtland Safety Society
from the Ohio legislature.
Despite these setbacks, the society continued to expand its economic reach
and acquire financial supporters inside and outside of . In March two additional contracts were signed,
establishing individuals in , Ohio, and Beaver
County, Pennsylvania, as agents of the Safety
Society. In discourses given on 6 April 1837, JS, , and each
focused on debt and the need for church members to support the
Kirtland Safety Society financially.
In his address, Rigdon identified three distinct sources of the
church’s debt: building the Kirtland , losing property in , and purchasing land in Kirtland for the
Saints. A few
days later, on 9 April, JS and Rigdon again spoke on the financial
situation of the church and urged members to accept the notes of the
Kirtland Safety Society and support the institution. Possibly fearing the seizure of his
property to pay outstanding debts, JS on 7 and 10 April sold or
transferred several large properties he owned to , who appears to have acted as his
agent.
From November 1836 to April 1837 financial matters were one of JS’s greatest concerns. Over these
six months he struggled to repay the debts of the church while
attempting to establish a new banking company. The documents
concerning the Kirtland Safety Society demonstrate its tumultuous
period of operation, from an ambitious beginning in November 1836,
through reorganization in January 1837, and into a constant struggle
for investors and support in spring 1837. Despite JS’s efforts, the
society faced frequent opposition and received only limited
support.