Mormonism 1838 -- What Went Wrong?

[_Nevo]

Actually, it was not an 'obscure' breaking of the law. It was financial fraud. . . . Joseph and all involved should have been indicted, charged and convicted of the fraud.

Joseph Smith and Sidney Rigdon were charged and convicted of violating an 1816 Ohio statute "that made conduct of the banking business by any persons or associates other than those duly incorporated by the legislature unlawful, and imposed as a penalty for violation of the statute a forfeiture of $1,000, recoverable in a civil action of debt, with one-half to go to the 'informer' and one-half to go to the State of Ohio" (see Marvin S. Hill, C. Keith Rooker, and Larry T. Wimmer, The Kirtland Economy Revisited: A Market Critique of Sectarian Economics [Provo, UT: Brigham Young University Press, 1977], 48; see also, here.).

Hill, Rooker, and Wimmer go on to say that "the question whether the activities of the Society in 1837 were indeed unlawful under Ohio law requires considerable and fairly sophisticated legal analysis. Although we are now satisfied that the activities of the Society did indeed violate the proscriptions of the 1816 Ohio Statute, that conclusion is not entirely free from doubt, even with the benefit of hindsight. It must have been much less clear in 1837, when Joseph Smith was faced with a decision as to how to proceed in the face of the refusal of the Ohio Legislature to grant a charter" (Hill et al., Kirtland Economy Revisited, 51).

The authors note that the Mormon banking venture was a victim of bad timing, liberal local banking practices (anti-Democratic newspapers encouraged the establishment of unauthorized banks), and "perhaps" bad legal counsel. They conclude that "Joseph Smith and other Mormon leaders operated on common assumptions about economic trends. Had they been able to secure a charter, it is likely that the demand on the bank would not have become excessive and thus the institution might have become a successful business enterprise. The initiation of the anti-banking experiment was unquestionably a mistake, but one of political misjudgment rather than intentional fraud" (Hill et al., Kirtland Economy Revisited, 70).

[_Uncle Dale]

...
Had they been able to secure a charter, it is likely that the demand on the bank would not have
become excessive and thus the institution might have become a successful business enterprise.
...

I agree -- at least in part. While I doubt that the bank would have ever become "successful,"
it might have at least died a respectable death, with some returns back to its share-holders.

According to one opinion I heard, the topmost leaders had been assured that the Ohio State
Legislature would issue a charter. Orson Hyde was the "point man" for promoting the project
among the Ohio state legislators -- but he had insufficient cash on hand to pay the necessary
bribes. Oliver Cowdery went east to get the printing plates for the bank-notes, thinking that
Hyde would be successful in getting the charter.

But Whig legislators were able to block the project, because Jacksonian legislators did not
push Old Testament hard enough (due to the insufficient bribes).

I do not know whether that is true or not, but my source was pretty sure it was. Another
factor is that some private associations at the time were able to issue notes that passed
for money. The Mormon leaders thought they could do the same, by altering their bank-notes
to say anti-Bank-ing ---- but the attempted change still was not enough to keep them from
being charged with issuing bank-notes on an unchartered bank.

My ancestral family was partly in Kirtland and partly in "Zion" at the time. They were able
to exchange their worthless Kirtland bills for Bank of Monroe bills. But then the Monroe bank
also went broke, leaving them with useless paper. They were disillusioned and began to
doubt that the Kirtland bank was truly founded on Divine revelation.

That's all I know from family tradition. I wish they'd kept at least a few of the bank-notes.
Somehow they managed to reconcile their disappointment with their loyalty, and remained
in the Church through the Nauvoo and Winter Quarters periods.

As for me,their descendant -- I do not believe for one minute that the bank was founded
on Divine revelation -- nor that it was looked over by Jesus Christ.

Uncle Dale

[_Nevo]

I too rather doubt that the Kirtland Safety Society was founded on divine revelation.

Wilford Woodruff recorded in his diary on 6 January 1837 that he "herd President Joseph Smith jr. declare in the presence of F[rederick] Williams, D[avid]. Whitmer, S[amuel]. Smith, W. Parrish, & others in the Deposit Office that he had receieved that morning the Word of the Lord upon the Subject of the Kirtland Safety Society. He was alone in a room by himself & he had not ownly the voice of the Spirit upon the Subject but even an audable voice. He did not tell us at that time what the LORD said upon the subject but remarked that if we would give heed to the Commandments the Lord had given this morning all would be well."

Given the way things turned out, one naturally wonders what the Lord did say to Joseph upon the subject.

I was looking over Dale Adams's 1984 BYU Studies article, "Chartering the Kirtland Bank." He proposes that there were actually two attempts to secure a bank charter from the Ohio legislature.

Apparently Hyde's initial attempt to find a sponsor for a bill to charter the bank was rebuffed by Geauga county's three Whig representatives, Seabury Ford, Timothy Rockwell, and Senator Ralph Granger. Adams points out that "all three of these Geauga county legislators had close contacts with the rabid Mormon hater, Grandison Newell, who almost single-handedly drove the Mormons out of Kirtland." It probably also didn't help that Mormon Kirtland "was an island of Democrats in a sea of Whigs" in Geauga county.

According to Adams, the second Kirtland Bank charter proposal "surfaced during discussion on 10 February 1837 of a Senate banking bill essentially recommending that no new banks be chartered by the Thirty-fifth Assembly. Samuel Medary, Democratic state senator from Clermont County (near Cincinnati) offered an amendment to that bill that would have authorized a charter for the Kirtland Bank. The amendment failed with Ralph Granger, state senator from Geauga County, voting against it. Amendments to add twelve other bank charters to the Senate Bank Bill were also submitted at the same time Samuel Medary proposed the Kirtland Bank Amendment. Only four of these amendments passed. Ultimately, no new bank was chartered in 1837" (Adams, "Chartering the Kirtland Bank," 478).

Adams offers this fatalistic conclusion: "It is clear that, with or without the bank, the economic turmoil that began in 1837 would have wrecked the Mormon community in Kirtland because of its highly levered position and the extremely short-term nature of its debts. Grandison Newell, Eber Howe, and other passionate enemies of the Church would have used this, plus other excuses, to purge the Mormons from their communities. Painful as it was, the bank affair probably did little to alter the course of Mormon history" (Adams, "Chartering the Kirtland Bank," 480).

Regarding your statement that Joseph Smith and friends artificially inflated the value of Kirtland Township lots, I note that Larry Wimmer takes a different view in his Encyclopedia of Mormonism article:

"The average price per acre of land sold in Kirtland rose from approximately $7 in 1832 to $44 in 1837, only to fall back to $17.50 in 1839. These dramatic changes, however, were related to movements in the general price level, trends in the value of land in neighboring communities, and the impact of population growth. Probably between 25 and 40 percent of the change in the nominal price of land was associated with generalized inflation during this period. As much as 84 percent of the remaining change in the real price of land was correlated with the rise and fall in population. . . . An examination of land transactions reveals nothing in the buying, selling, or subdividing of land that was unusual for a frontier community."

[_zzyzx]

"The initiation of the anti-banking experiment was unquestionably a mistake, but one of political misjudgment rather than intentional fraud" (Hill et al., Kirtland Economy Revisited, 70)."

There isn't 'intentional fraud' in salting the vault and misrepresenting the financial stability of the deposits there? A layer of coins on top of a box of sand is as bad as it gets.

Where do I find a copy of Joseph Smiths conviction for Bank Fraud?

[Anonymous]

There isn't 'intentional fraud' in salting the vault and misrepresenting the financial stability of the deposits there? A layer of coins on top of a box of sand is as bad as it gets.

I don't know of any historian since Brodie who has taken this "salting the vault" story seriously (and I'm not sure that even Brodie was convinced of its accuracy). The story appears to have originated with Oliver Olney, who mentioned it in a bit of doggerel in his 1843 anti-Mormon pamphlet, The Absurdities of Mormonism Portrayed:

"As Pedlars went to and fro from the Bank,
In connection with business men,
From different parts of the land,
They [soon] see themselves in difficulty.
As gold and silver began to be scarce,
They got hold of a quantity of boxes,
And nearly filled them with sand,
Lead, old iron, stone, and combustibles,
And covered it up with clean coin.
That darkened the deception beneath,
That showed they were not to be run,
By the men of the world.
But the skim on the top soon disappeared.
And the currency, city lots, and farms,
All went down to their value.
As thousands on thousands of dollars
Had been paid out for lands,
That had made payments but in part,
Their lands went back to satisfy a security bond,
To those of whom they had bought."

Chauncey Webb apparently repeated the story to Wilhelm Wyl in 1885, stating that "in the bank they kept eight or nine window-glass boxes, which seemed to be full of silver; but the initiated knew very well that they were full of sand, only the top being covered with Accent pieces." But Webb's "recollection" is problematic on a number of levels. For one thing, Webb seems to be repeating a rumor, rather than relating first-hand knowledge. He doesn't say that he saw the boxes or knew that they were full of sand. Wyl has Webb claiming that he lost $2,500 in the bank, when the Kirtland Safety Society ledger shows that he only invested $10 (his losses would have been higher, but I doubt they were that much higher). Also, if Webb truly believed that Joseph Smith was a fraud who bilked his followers of their savings, why did Webb remain a faithful member of the Church for several more decades (he was endowed in the Nauvoo Temple in 1845; he built the wagon that carried Brigham Young to the Salt Lake Valley in 1847; he built the handcarts for the ill-fated 1856 handcart expeditions, etc.)?

It is telling, I think, that the story is not corroborated by the statements of Warren Parrish or any of the other disaffected LDS leaders who were in a position to know if the story was true, and who were more than willing to dish dirt on the Prophet.

Also, as Dale Adams points out, the story does not seem to match other facts in the historical record. In October 1836, Joseph Smith purchased a safe for use in the bank he and other Church leaders were planning: "The safe measured only 25 by 24 by 29 inches. The dimensions of the safe cast a serious shadow on the validity of stories of various apostates cited by Brodie. They claimed that the shelves of the bank vault were lined with many boxes each marked $1,000. These many boxes were supposedly filled with sand, lead, old iron, and stone with only a thin layer of coins on top. . . . [T]he founders of the bank probably had enough genuine specie when the bank was opened to fill the several small boxes that might have occupied this very modest safe" (Adams, "Chartering the Kirtland Bank," 479n8).

Where do I find a copy of Joseph Smiths conviction for Bank Fraud?

The reference given in Hill, Rooker, and Wimmer's The Kirtland Economy Revisited is: Court of Common Pleas, Book U., Geauga County, Ohio, pp. 353ff.

[_Uncle Dale]

...
An examination of land transactions reveals nothing in the buying, selling, or subdividing of land that
was unusual for a frontier community."

Which is why I went in person to the Geauga County records center a few years ago, and obtained
scans of the real estate transactions for Kirtland township, c. 1833-38.

What I saw there was evidence for certain parcels of land being sold and re-sold among Smith's
closest associates and family members. Some lots passed through several different owners in
the course of a few months, with each transaction raising the price. Although I cannot prove it,
my belief is that the only money that was exchanged in these "sales" was the small recording
fee paid to the county, each time a land title was changed to a new owner.

In some cases these continual transfers ended in the purchase of a lot by an "outsider" -- a
newcomer to Kirtland, or -- eventually in most cases, to a Gentile.

It would take a detailed examination of the real estate history, worthy of a PhD thesis perhaps,
in order to sort out all of the price-inflating efforts of the Mormon leaders, from the actual rise
in land prices, due to other, exterior influences.

Rather than looking at the average valuation changes for lots in Kirtland twonship, the investigator
should carefully study the history of those town lots nearest the Temple, along with some of the
lots in Kirtland Flats, in the commercial zone, and bordering the river (where mills were erected).

While this jacking up of prices may not have been "unusual for a frontier community," we should
also remember that Kirtland was not on the frontier -- was not a planned land speculation site
in the same way that Nauvoo and other towns were. The inflation of land prices at Kirtland
was an artificial phenomenon, based upon the supposed Divinely-ordered LDS "gathering." The
actual Saints who thus "gathered" were generally poor people, who did not bring much silver
and gold into the Geauga Co. economy. They were a drain upon the wealth of the community.
For the mid-1830s, the major "economy" of the Mormons at Kirtland was the inflation of lot
prices near the Temple site. Or so I conclude, until somebody convinces me otherwise.

UD

[_Uncle Dale]

...
the story is not corroborated by the statements of Warren Parrish or any of the other
disaffected LDS leaders
...

Possibly there was a time when some boxes of "junk" were overlaid with silver coins,
to convince some observers that the Bank had more specie on hand than it actually had.

However, absent some independent confirming evidence, I suppose that these claims
must be relegated to the category of folklore.

On the other hand, if such independent confirming evidence ever became available, it would
not surprise me one iota.

What surprised me, was my discovery that the Bank did not collapse due to the embezzlement
of vast sums of silver and gold by Warren Parrish. It is shameful that such a simplistic
explanation was ever promulgated by the Reorganized LDS Church -- just as editor Smith's
demonization of Parrish in the 1838 Elders Journal was shameful.

UD

[_why me]

Mormonism 1838--what went wrong? Joseph Smith and all the rest abandoned god and tried to get rich. It became a crisis of faith and many failed the test when the bank failed. No one has ever said that a prophet living in the world must be perfect. However, from this collaspe the saints emerged stronger and more determined to spread the gospel. The lesson was learned the hard way.

[_Uncle Dale]

...
Joseph Smith and all the rest abandoned god and tried to get rich
...

Still practicing your testimony for the next F&T Sunday, friend?
You may want to run that past Bish, before going up to the podium.

UD

[_zzyzx]

What is to be made of the 'salting the vault' passage mentioned in the Levi Tucker letter at the start of this topic?

On Bank Fraud, just what was Joseph convicted of?