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
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,"Comment on this story
"And that's it," White said. "The myths are gone. There's nothing to
cover up, nothing to hide, nothing to be embarrassed about."