clock menu more-arrow no yes

Filed under:

Kirtland Safety Society myths dispelled

SANDY, Utah — There were no bailouts for the Kirtland Safety Society

Anti-Banking Company when it collapsed in 1837, and the failure of this private bank is still used by critics to

attack Mormons and the Prophet Joseph Smith. "I will explode the

criticisms stemming from the Safety Society and put these issues to

rest, once and for all," said R. McKay White, a lawyer and an economist

from Edmonton, Alberta.

White spoke at the 11th annual Mormon Apologetics Conference presented

by FAIR, the Foundation for Apologetic Information & Research, on Thursday, Aug. 6, exploring and disputing the myths he says are used by critics.


Joseph Smith and Sidney Rigdon set up the Safety Society as a "Wildcat

Bank," a place where he took people's money, issued fake bank notes,

and fled the state with their gold and silver.

White said the point of a wildcat bank is to take the money, issue

notes and disappear before anyone can try to cash in their notes. If

Joseph was trying to set up a fly-by-night institution, he didn't do a

good job. The Safety Society was in a building near the temple and was

only a block away from his home and across the street from Rigdon.


The Safety Society was illegal because their application for a bank

charter was rejected. They started up an "anti-bank" or joint-stock

association, and Joseph and Rigdon were convicted under an 1816 Act that

prohibited those organizations.

"The court that convicted Joseph Smith and Sidney Rigdon got it wrong,"

White said. "Their appeal was never heard because they were forced to

flee the state."White used evidence he said had "never been published

before." He quoted several articles from an 1837 newspaper that said

the 1816 Act was not in force. In an interview after his presentation,

White explained further that the Ohio State Legislature did not print

the 1816 law in its official book of statutes in 1824.

White told conference participants that multiple organizations ran similar private "banks" at the same time with no prosecution.

"Now, why weren't they (prosecuted) when Joseph Smith and Sidney Rigdon were?" White

said. "It couldn't be because of religious persecution. Well, it was. It

was intended to get Joseph out of town, and it worked."

Bottom line: the Kirtland Safety Society wasn't illegal.


The collapse of the Safety Society proved Joseph wasn't a prophet because he had a revelation that said it would never fail.

The only person who claimed he heard such a revelation, according to

White, was Warren Parrish. White implied Parrish was unreliable for

reasons White related a few minutes later.

White said Joseph did have a revelation three months after he left the

Safety Society. He said, "I had always said that unless the institution

was conducted on righteous principles, it would not stand."

"Now, that prophecy came to pass when the Safety Society failed two months later," White said.


When Joseph left the Safety Society, he had pockets filled with gold

and silver coins. He printed the money to pay off his debts and/or get


"If that were true, you'd think he'd have something to show for it," White said.

White then explained the whole reason why Joseph wanted to establish a

bank. Because "hard money" (gold, silver and copper coins) was scarce,

it was difficult to pay debts — not because there was nothing of

value, but because the value was locked up in long-term assets like

land, crops and goods. Hard money couldn't be produced fast enough to

keep pace with a growing economy. Relying on promissory notes and

bartering stifled economic growth. A bank could issue paper money,

making the value of long-term assets accessible. This would end the

money supply shortage.

"(Joseph's) assets were more than sufficient to meet his debts," White

said. "The only trouble was that his assets were long-term — mostly

land." Most of his debts had co-signers and he was "only secondarily

liable for a lot of (the debts)."

"(Joseph) invested more money than probably everyone else," White said. If he were in it for the money, he would have pulled out at the first

signs that the Safety Society was struggling. Instead, he took out loans

on its behalf and even sold personal property for $5,000 to help it

out. But his bailout attempts didn't work.

"So Joseph Smith actually lost a lot of money from the Safety Society," White said.


An honest person wouldn't have tried to start a private "bank" like

this without proper expertise. Joseph had no idea how to run a

financial institution.

In frontier America, it was common for banks to be started by people who

didn't know how to run one. There were no MBAs. "No one starting a bank

in Kirtland, in 1837, would have had any more knowledge of how to do it

than Joseph Smith and Sidney Rigdon," White said.


The Safety Society failed because Joseph and Rigdon foolishly kept printing notes until it collapsed.

Under Joseph's management, they printed $100,000 in

notes with a reserve of $21,000. Compare that 21 percent reserve with

Canada's largest bank. The Royal Bank of Canada had a reserve ratio of

three percent in 2008. Banks are different now, but 21 percent

was very reasonable in 1837, according to White.

White proposed two reasons why the Safety Society failed. First was "a

good old-fashioned bank run." The run was caused by antagonists. They

collected as many notes as they could and then demanded hard money.

Their intent was to drain the organization of all its reserves. The

Safety Society had to stop exchanging hard money for the notes, which

led to the collapse of the notes' value.

The second reason was Warren Parrish, who was an officer of the Safety

Society. Money kept disappearing when Parrish had access to it.

According to Heber C. Kimball, Parrish later admitted to embezzling


The Safety Society, as you recall, had a reserve of $21,000 in hard

money and notes from other banks. "With that $20,000 that Parrish stole

from the Safety Society he could have completely wiped out the Safety

Society's liquid assets," White said. This is the same person who

attempted to take over the Kirtland Temple once with pistols and bowie


"Did Joseph Smith ruin the Safety Society? No. It was a coordinated

attack by church enemies, and fraud by the apostate Warren Parrish,"

White said.

"And that's it," White said. "The myths are gone. There's nothing to

cover up, nothing to hide, nothing to be embarrassed about."