Kirtland Safety Society
The Kirtland Safety Society (KSS) was a financial institution founded by Joseph Smith , Founder and President of The Church of Jesus Christ of Latter-day Saints on January 1, 1837, to address liquidity shortages in his faith, business and community in Kirtland (Ohio) to help promote the region's economy. Sidney Rigdon was president of the bank, and Smith himself acted as cashier. The bank collapsed in November 1837 and caused high losses among its customers and shareholders due to the failure of the US to adopt financial policies, a lack of approvals and a lack of understanding of monetary policy on the part of the operators.
The history
Kirtland, not far from Lake Erie, was an up-and-coming community on the edge of the United States around 1830 and attracted many new settlers, a typical city of the "Wild West" full of boundless optimism, energy and often dubious economic practices, which the patchy laws did not provide an effective stop advanced. The relocation of the headquarters of the newly founded Church of Jesus Christ of Latter-day Saints from Palmyra, New York to Kirtland , triggered a real immigration boom in 1831 . The influx caused fierce land speculation, which multiplied land prices. To keep the growing economy going and to meet the liquidity needs of all the new entrepreneurs and the church, both cash and credit were increased. Neither was available, or only at horrendous interest rates. There was enough property in the form of land and business to secure any loans.
As for the Church, the situation was exacerbated in 1836 with the relatively expensive construction of the Kirtland Temple . The ongoing immigration of converts with their economic consequences also had to be organized. Since no help was expected from the state or the banks in the east, banks were founded in the border region. Joseph Smith also decided to set up a bank in order to use the banknotes and loans it issued to remove the constant shortage of liquidity. In general, the inhabitants of the west hoped that the establishment of banks would solve their economic problems, and above all they hoped for loans to finance their ideas for developing the country and thus to get rich.
The foundation
As early as August 1836, Oliver Cowdery was exploring the manufacture of banknotes, which was completely legal for approved banks at the time. Banknotes were documents that stated that when they were presented, the bank would pay out the stated value in gold.
On November 2, 1836, the bylaws of the Kirtland Safety Society Bank were passed with Sidney Rigdon as President and Joseph Smith as Treasurer. The state of Ohio, dominated by Democrats who were fundamentally opposed to banks, refused the bank approval. The bank was then converted into a public company called the Kirtland Safety Society Anti-Banking Company. The intended banknotes were issued as shares. This was a legal trick. In fact, society should continue to function as a bank and, above all, ensure the liquidity necessary for the economy.
The operation
The company began operations on January 2, 1837, granting loans on its securities backed by real estate. Joseph Smith encouraged members to participate in this public company. The KSS announced in January that it could exchange its securities for land, but not for gold, as gold simply could not be obtained on acceptable terms. This caused the value to decline. They were already trading in early February at a price of 12.5 cents per dollar of face value. As the cash book found again shows, the shares were traded at a lower issue price of 26.5 cents right from the start. This means that the papers were not accepted as a means of payment for goods and services, as intended by the founders. A second attempt to gain approval as a bank failed in February 1837.
The collapse
When a major financial crisis hit the USA in May, it was foreseeable that, like many other institutes, the Kirtland Safety Society would not be able to hold up, especially since it had not really enjoyed the trust of the population from the start.
Banks in the surrounding countries stopped redeeming banknotes in gold or silver. As a result, the banks in Ohio were also forced to stop cashing in, so as not to completely lose their own leeway through a complete migration of the already sparse precious metal reserves. As a result, the banks generally lost confidence and no one wanted to accept the banknotes they issued as a means of payment. The collapse was inevitable. The situation was exacerbated by the fact that the banks' borrowers, and thus the banks themselves, became excessively indebted in the hope of being successful with their companies and then being able to repay the loans easily.
Allegations that the institute was run in a disorderly or even criminal manner have been invalidated since the cash book was found. It also shows that business operations continued until at least July 1837.
In June 1837 it became clear that the Kirtland Safety Society would not survive. Joseph Smith pressed for an end to business and withdrew himself from the financial institution.
At that time, Edward Partridge gained greater importance, who, against his better judgment, continued to issue banknotes of the society, thus worsening the now certain collapse.
Consequences of the collapse
The immediate consequence was that a large number of people lost their fortunes. Since it was a Mormon financial institution, it was mostly Mormons. It was also not possible to get the pressing financial problems in Kirtland under permanent control; on the contrary, the situation was worse than before. The controversy over who was to blame for the misery led, among other issues of principle, to a deep rift in the Church that culminated with the excommunication of a number of leaders. Among the disfellowshipped of that time were four from the Quorum of the Twelve Apostles established in 1835, and all three Book of Mormon Witnesses, Oliver Cowdery , David Whitmer, and Martin Harris . Joseph Smith was called a "fallen prophet" by the discontented. He would have obviously acted uninspired about the Kirtland Safety Society or things wouldn't have gone wrong, they argued.
Joseph Smith, in being responsible for the company's debts, had a debt of $ 100,000 which he attempted to pay off. He and Sidney Rigdon fled to Missouri because they feared that angry victims who had become their enemies could take vengeance on them, and they wanted to evade the Ohio authorities. Joseph Smith, on the other hand, employed Oliver Granger as his agent to do the best possible business for the Church in Kirtland. This was reflected, among other things, in a revelation. In addition, the transfer of the shares of Joseph Smith and nine other shareholders to O.Granger and J.Carter on June 8, 1837, which was recorded in the cash register, indicates this. In a civil lawsuit, Joseph Smith and Sidney Rigdon were sentenced to substantial fines for illegally operating the Kirtland Safety Society.
After the Church established a second center in Missouri in 1831, the seat was completely relocated to Missouri in 1838, and Church members almost entirely emigrated from Kirtland and the surrounding area. The collapse of the KSS helped accelerate this move. The main reason, however, was that Joseph Smith had declared in revelations as early as 1831 and 1832 that the "New Jerusalem" would be established in Missouri and that the Saints would gather there.
Individual evidence
- ^ Scott H. Partridge, The Failure of the Kirtland Safety Society , BYU Studies 1972 p. 3
- ↑ For details, see Dale W. Adams, Chartering the Kirtland Bank , BYU Studies 1983
- ↑ Joseph Smith, History of the Church of Jesus Christ of Latter Day Saints , edited by BH Roberts, 7 volumes, p. 473 (quoted in Scott H. Partridge, The Failure of the Kirtland Safety Society , BYU Studies 1972)
- ^ D. Paul Sampson, Larry T. Wimmer, The Kirtland Safety Society: The Stock Ledger Book and the Bank Failure , BYU Studies 1972 p. 429
- ↑ See Deseret Morning News, Church Almanac 2007, pp. 60–61
- ^ See Doctrine and Covenants 117
- ↑ See Doctrine and Covenants 57: 1-2 and Doctrine and Covenants 84: 1-4