22 Frederick G. Williams, Officer of the Kirtland Safety Society

On February 9, 1837, a writ of summons was issued to Frederick G. Williams, ordering him to appear before the Court of Common Pleas at the Geauga County courthouse in Chardon, Ohio, on March 21, 1837. The suit, brought by Samuel D. Rounds, was to recover $1,000 in debt and $1,000 in penalty against Frederick G. Williams, an officer of a bank not incorporated by the laws of the state of Ohio.

For that the said Frederick G. Williams on the fourth day of January in the year of our Lord one thousand eight hundred and thirty seven at Kirtland township in said County of Geauga, did act as an officer, servant, agent and trustee of a Bank called “Kirtland Safety Society anti-Banking Co.” which said last mentioned Bank was not then and there incorporated by law, by then and there assisting in the discounting of paper and lending money for said Bank.¹

Of course the suit for recovery of funds was aimed not only at Williams personally, but effectively also at the financial institution he represented. The summons claimed that on January 4, 1837, Frederick G. Williams “did act as an officer, servant, agent and trustee of a Bank called ‘Kirtland Safety Society anti-Banking Co.’” It was in fact on January 4, 1837, that Williams signed his name as secretary pro tempore on a number of Safety Society banknotes; apparently one of these was used as evidence in the suit.² What had happened? What led to this situation?

Although the Kirtland Safety Society existed for less than a year (November 1836 to July 1837), the failure of the short-lived Mormon bank would focus attention on the economic plight of the Church and its members; it would also serve as a reason for increased religious persecution from the community without and from disgruntled members within. The end result of the failure of the bank was that there were deep resentments and heartfelt contentions among the members and against the leadership of Joseph Smith, the bank’s president. Some apostatized, others left the Church, and several heretofore stalwart leaders were excommunicated. By the end of 1837, most Church members had moved out of Ohio and traveled over eight hundred miles to the Mormon settlements in Missouri. It is interesting to note that even those at odds with the leaders of the Church gathered to Missouri, an indication, perhaps, of deep-seated loyalty obscured by hurt feelings, but still nurturing the hope that an apology would be forthcoming so that there could be forgiveness and reconciliation, a not uncommon phenomenon among siblings who apparently hate each other.³

Financial Needs of the Community

Most members of the Church were not well-to-do; nevertheless, they had given their time and what little money they had for the building of the Kirtland Temple, which had been dedicated on March 27, 1836. But personal loans had made up the bulk of the money for the land and the construction, and the promissory notes were coming due. In addition to establishing Zion in Missouri, Joseph also had plans for building up Kirtland. “Through the month of October [1836] the Saints continued to gather at Shoal Creek, Missouri, and my attention was particularly directed to the building up of Kirtland, and the spiritual interests of the Church.”⁴ But where would the financing come from?

Antebellum Banking Practices: Addressing the Need for Money

The first national legal tender notes were the so-called “greenback” federal dollars that came into existence during the Civil War. Before then, each banking institution issued its own banknotes, backed by silver or, sometimes, gold coins kept in their own safes. These banknotes were printed only on one side and functioned much like today’s personal checks. The system worked well enough on a local or rural level. “The main flaw in state banking in the 1830s was that it was predominantly a rural institution and had little liquidity or shiftability. In the large cities of the East, loans could be liquidated—that is, turned into cash quickly—by simply calling for payment, but this could not be done in the outlying areas.”⁵ A rural citizen could use the banknote of a local bank for his purchases and financial transactions, confident that the merchants or individuals with whom he did business would be able to redeem the notes at the local bank. But if a citizen wanted to use the banknote of his hometown bank in another city, the merchants of that city had no way of knowing if the note was genuine or counterfeit. Even if it were shown to be genuine, they still had no way of knowing if it were still backed by the required silver or gold specie. If everything was in order and the merchant was persuaded to accept the note, he then faced the problem of how to redeem it, since the bank on which it was drawn was located in a different city. If the merchant did travel to the other city to redeem the banknote, he ran the risk of being robbed on his return home. In order to avoid the possibility of robbery, banknotes were often used to pay debts and thus circulated as money between one individual and another, and from one bank to another, but without anyone ever redeeming them. Thus the notes circulated as money, which was in high demand as a medium of exchange before the establishment of a federal monetary system. Since the banknote could be redeemed by the original signatory or by the current bearer, one always hoped that when the last bearer of the note presented it at the bank of origin, there would be funds to cover it. “Banks were able and willing to meet the demand for money by the simple process of exchanging the notes of a bank for the promissory note or bill of exchange of a firm or individual, i.e., by exchanging one kind of debt for another. The evidence of a bank’s debt had general acceptability as a medium of exchange; the evidence of a firm’s or individual’s debt did not. Thus, by monetizing private debt, the growing demand for money was met.”⁶

Safeguards against Counterfeit Banknotes

One method devised to safeguard against counterfeit banknotes and banknotes with insufficient funds backing them was a monthly publication launched in the early 1830s called Bicknell’s Counterfeit Detector and Bank Note List, published in Philadelphia by Robert T. Bicknell and sold at a cost of twenty-five cents a copy.⁷ It listed the various banks by city and state that had failed or were on the brink of bankruptcy and whose money would soon be worthless. News from this publication was reprinted in newspapers across the nation, but as it was only published monthly, the delay in up-to-date information could play into the hands of the unscrupulous.

Many banks failed in the mid-1830s. Scott H. Partridge quotes Paul B. Trescott on the surprising number of bank failures: “In summary, some indication of the failure record of state banks during this period can be gleaned from the comment by Trescott that ‘nearly one-half of the banks formed between 1810 and 1820 failed before 1825, and a similar proportion of the banks formed between 1830 and 1840 closed by 1845.’”⁸

Many rural banks found it difficult to maintain sufficient silver specie to keep up with the demand to redeem their banknotes. In a short time, their notes were discounted—some were even devalued to zero—which led to the bank’s failure.

In small towns and country districts, banks made long-term loans against farm mortgages and issued short-term liabilities in the form of bank notes to borrowers. The borrowers, in turn, used the bank notes to purchase commodities—mostly capital goods—from industrial and commercial centers. When the notes were presented for redemption, the average state bank could not turn its assets into cash fast enough to meet these demands and found it difficult to maintain specie payments. Bank notes circulated at a discount and often became completely worthless.⁹

A Rural Bank Model¹⁰

In the case of the Thompson Bank of Connecticut, it was run by one man, the cashier, and he was visited by the bank president only once a week to countersign the banknotes it issued. During his visit, the president would also consider any requested loans above the amount the cashier could grant. If the cashier did not know the prospective borrower, the individual would be asked to return on Wednesday when the president came to call; perhaps he could persuade the president to lend him the money.

The cashier made $400 per annum, or some $2 a day, and worked ten hours a day. By contrast, an unskilled day laborer would earn fifty cents a day. Typically, loans were made for ninety days at 6 percent interest. A loan could be extended past the due date for a fee and at a higher interest rate. If the individual did not meet the payment deadline, the cashier would seek a writ from a justice of the peace, directing the constable to visit the delinquent borrower’s abode. There he was authorized to seize property to satisfy the debt. The items seized could not be the tools of the person’s trade or the clothes on his back, but practically any other items could be seized and then sold at auction to pay off the debt. If the debt were more than $20, then the case would go to the circuit court.

Most bank loans went to businesses and were not for home mortgages or personal property. If one did not have the cash to purchase a home or land to trade for property, one would typically secure a loan from an individual and would guarantee it by signing a promissory note.

The Thompson Bank issued its own banknotes (as did over four hundred other banks in the United States in 1838, most of them located in New England), which could be redeemed for silver coins but were rarely redeemed in kind or in trade. The coins on deposit that guaranteed the banknotes and that were kept in the safe on the premises of the Thompson Bank, were typically Mexican pesos, Spanish pesos, American dollars, or English pounds sterling. The Thompson Bank would sometimes risk redeeming banknotes from other banks, but only at a discounted price below their face value. The full face value of the note from a different bank could be accepted if that bank kept a reserve of silver coins at the Thompson Bank. To facilitate such transactions, the Thompson Bank also kept some silver reserves at other banks so their notes could be redeemed at full face value.

The cashier was audited regularly. He also reported monthly on the entries in his books, and he was responsible for paying a percentage of the profits monthly to the trustees. The trustees were shareholders whose combined assets (that is, the money they put into the bank safe) was $100,000. It was from this money that the loans were made. It is interesting to note that the Thompson Bank was never held up until after 1862, when the first federal money, the “greenback,” came into existence and circulated widely. It was at that point that all bank-issued money ceased operation.

The Thompson Bank had its banknotes printed in New York. The bank could legally issue 25 percent more in banknotes than they held in the safe in silver coins. A note was redeemed from the originating bank as soon as possible, lest the bank go bankrupt, a common occurrence. A person who held a banknote could endorse it over to another person, like a personal check. A fee was charged for the loan, however, in addition to the 6 percent interest.

The cashier was bonded for $20,000, a sum he obtained by taking out insurance, whose premiums he had withheld from his own pay.

Articles of Agreements for a Mormon Bank

The Church leaders had tried repeatedly to get loans from the local banks, but with little or no success. After considerable thought, a proposal was made to establish a Mormon bank. The date of the organizing meeting was November 2, 1836. Apostle Orson Hyde was dispatched to the Ohio legislature in Columbus seeking legal status for the institution, while President Oliver Cowdery was sent to Philadelphia to obtain plates with which to print the banknotes. Elder Cowdery was successful; Elder Hyde was not.

On the 2nd of November the brethren at Kirtland drew up certain articles of agreement, preparatory to the organization of a banking institution, to be called the “Kirtland Safety Society.” President Oliver Cowdery was delegated to Philadelphia to procure plates for the institution; and Elder Orson Hyde to repair to Columbus with a petition to the legislature of Ohio, for an act of incorporation, which was presented at an early period of their session, but because we were “Mormons” the legislature raised some frivolous excuse on which they refused to grant us those banking privileges they so freely granted to others. Thus Elder Hyde was compelled to return without accomplishing the object of his mission, while Elder Cowdery succeeded at a great expense in procuring the plates, and bringing them to Kirtland.¹¹

The Kirtland Safety Society: 
A Joint Stock Company with Shareholders

Although the Kirtland Safety Society was turned down in its bid to become a legally recognized bank, the need for such a financial institution was such that the Church leaders went ahead with its creation, but used instead an alternative organization. Scott H. Partridge gives a short history of the Kirtland Safety Society and lists ten areas of agreement among scholars, which include the following two points.

The Mormon leaders were unsuccessful in obtaining a bank charter from the state of Ohio. Either they were refused a charter as Joseph Smith states, or they were persuaded of the uselessness of attempting to obtain one from an unfriendly legislature dominated by anti-bank Democrats. In any case, although they would have been pleased to obtain a charter, they were apparently unable to do so.

The founders selected the alternative of organizing a joint stock company with note-issuing powers. This “bank” they called the “Kirtland Safety Society Antibanking Company.” Joseph Smith, as treasurer, signed the promissory notes issued by the Society. The articles of incorporation established regular procedures for management and auditing the affairs of the organization and set the liability of individual members at $100,000.¹²

The Church leaders were likely encouraged in their actions by thinking of the banknotes as the equivalent of promissory notes,¹³ which were much in use and which were recognized as legal tender by the law. One way they differentiated between their new joint stock company and the bank they had originally proposed was to change some words and add others to the already printed banknotes. They added a stamped “Anti” before the word Bank and an “ing” at the end, which technically made them not a bank but an “antibanking” society. They also blotted out the printed titles “Cashr” and “Pres,” most of the time, and had the principals sign the notes as secretary and treasurer, or secretary and treasurer pro tempore.

Whether establishing a bank or a joint stock company, no one person or even group of persons (such as those who had belonged to the United Firm) was in a position to provide enough funding to make the “bank” operational. It was ultimately decided that the members of the “Anti-Banking Society” should purchase discounted shares with their hard currency and legal notes, which would then provide the needed specie to back the banknotes. To hold the specie, the new financial institution procured a small iron safe, which can be seen today at the Western Reserve Historical Society Museum in Cleveland.¹⁴

Second Organizational Meeting and Articles of Agreement

The second organizational meeting of the Kirtland Safety Society was held on January 2, 1837. The minutes, entitled “Articles of Agreement of the Kirtland Safety Society,” were published in the January 1837 issue of the Messenger and Advocate. The preface indicates that two-thirds of the members were present and that new bylaws were adopted. The first order of business was to annul the old constitution.

ARTICLES OF AGREEMENT

Minutes of a meeting of the members of the “Kirtland Safety Society,” held on the 2d day of January, 1837.

At a special meeting of the Kirtland Safety Society, two thirds of the members being present, S. Rigdon was called to the Chair, and W.[arren] Parrish chosen Secretary.

The House was called to order, and the object of the meeting explained by the chairman; which was: 1st. To annul the old constitution, which was adopted by the society, on the 2d day of November, 1836: which was, on motion, by the unanimous voice of the meeting, annulled.¹⁵

The “Articles of Agreement” were published again, with some modifications, in the March 1837 issue, this time with the names of those members in attendance.¹⁶ It is curious that Frederick G. Williams’s name does not appear. However, Joseph Smith indicates that Williams was a witness to the signing of the “Kirtland Safety Society Managers’ Agreement” that took place January 14, 1837.¹⁷

In the January 1837 version, the society’s constitution called for thirty-two managers (in the March version they were designated directors), to be chosen annually, who were to elect from within their number a treasurer (in the March version the title was changed to president) and a secretary (in the March version the title was changed to cashier). All notes were to be signed by these two.

Joseph Smith urged the Saints to join. Coming immediately after the publication of the articles of agreement, he published the following:

In connexion with the above Articles of Agreement of the Kirtland Safety Society, I beg leave to make a few remarks to all those who are preparing themselves, and appointing their wise men, for the purpose of building up Zion and her Stakes. It is wisdom and according to the mind of the Holy Spirit, that you should call at Kirtland, and receive counsel and instruction upon those principles that are necessary to further the great work of the Lord, and to establish the children of the Kingdom, according to the oracles of God, as they are had among us. And further, we invite the brethren from abroad, to call on us, and take stock in our Safety Society.¹⁸

Failure of the Bank

The Kirtland Safety Society probably could have succeeded except for two developments, both of which were essentially beyond the control of its managers. The first was the financial downturn or crash that affected many institutions of the day, and the second was the expressed hostility of the enemies of the Church, who, after securing the banknotes, demanded payment in hard currency with a view to embarrass the Church before its creditors.

Soon after things went bust, editor W. A. Cowdery gave an excellent and lengthy contemporary critique of the Kirtland Bank situation in the July 1837 issue of the Messenger and Advocate. Of particular interest among the many points Warren Cowdery makes in his analysis is that the enemies of the Church traded in the Kirtland banknotes with the express purpose of sinking the institution by making what amounts to a run on the bank, or in this case a run on the credit union. Warren A. Cowdery wrote:

There were two classes of people and both appeared equally anxious, but they were actuated by diametrically opposite motives. The one part were anxious to pay their debts, supply themselves with food, and build up the place: the other being enemies, had our ruin in view, and were willing to receive the bills, come and demand the specie on them, and when the notes become due that were given for bills at the bank, avail themselves of that clause of the statute which we have quoted to avoid payment, still the officers of the bank continued to redeem, their paper when presented. Previously to the commencement of discounting by the bank, large debts had been contracted for merchandize in New York and other cities, and large contracts entered into for real estate in this town, and adjoining towns, some of them had fallen due and must be met or incur forfeitures of large sums.— These causes, we are bound to believe, operated to induce the officers of the bank to let out larger sums than their better judgements dictated, which almost invariably fell into, or passed through the hands of those who sought our ruin. Our enemies foresaw, and every man might foresee without the gift of prophecy, the down fall of the institution.

Warren Cowdery goes on to note that the first two officers of the Society (Joseph Smith and Sidney Rigdon) resigned their positions and withdrew from the institution. “About this time the two first officers of the bank resigned, sold out their interest and withdrew from the institution. All banks throughout the country, one after another suspended specie payment. Some of them were as illy able to continue when they stopped as was ours, but they had charters, were popular and waited till it was popular to suspend payment, and then they could do so with impunity whether they had five dollars or five thousand to redeem their paper.”¹⁹

The Stock Ledger Book of the Kirtland Safety Society

The Kirtland Safety Society’s Stock Ledger Book is found in the Chicago Historical Society Museum.²⁰ How it came to light is not entirely clear. On the ledger’s last page (unnumbered) and found on the right page when opened and laid flat, is a brief note dated April 10, 1885, from Cleveland, Ohio, suggesting that one Arthur B. Deming found it. “This Stock Ledger had been secreted since the Bank failed in 1837 and was found by Arthur B. Deming (son of Gen M. R. Deming under whose charges Joseph and Hiram Smith were killed by a mob in Carthage Jail in Ill June 27th 1844) while securing evidence as to the true origin and early history of Mormonism.” The ledger is approximately 15" long by 9½" wide when opened. On the first unnumbered page on the left sheet, which faces the letter A on the right sheet, and evidently added much later, is written “Mormon Bank Kirtland Ohio.”

An index of stockholders in alphabetical order takes up the initial unnumbered pages of the ledger. The total number of names listed in the index comes to 192, of which 20 are women, and distributed alphabetically as follows.

A: 9 names

B: 25

C: 21

D: 9

E: 3

F: 7

G: 13 with one struck through, leaving 12

H: 13

I [& J]: 7

K: 6 with one struck through, leaving 5

L: 3

M: 7 with one struck through, leaving 6

N: 3

O: 1

P: 12

Q: blank

R: 8

S: 35

T: 4

U: blank

V: 1

W: 16 with one struck through, leaving 15

[there is no X page]

Y: 3

Z: blank

One of the fifteen names listed under the letter W is that of President Frederick G. Williams: “Williams F. G. – [page] 197.”

When the numbered pages of the ledger begin, the page on the left side, or verso, has a capital D for debits, and lists the name of the stockholder with the number of shares and the price. On the right side page, or recto, the heading is “Contra” or credits, and lists the date when the shares were sold or traded and the cash amount received by the institution. Apparently there were no stock certificates distributed in exchange for the cash, since no examples have ever come to light and no diaries report their existence. “Whether the stock credited in the ledger was actually distributed is doubtful, because no specimen of such stock has come to light and no diaries report such. Whether the subscribers received bank notes in return for their subscriptions is also not known. This may have been the method by which the notes were placed in circulation, though the ledger does not tell us explicitly what the relationship was between bank payments and Kirtland Bank notes.”²¹

The entry for President Williams on page 197 reads as follows:

[Left page]

p. 197 [Ds]        F. G. Williams

2000 Shares Stock $50 Ea 100,000

Nov 16 [1836] Cash 15.00

[Right page]

Contra        [page] 198.

[In very light writing] $500 [dirc]

Evidently, on November 16, 1836, President Williams paid into the coffers of the Kirtland Safety Society the sum of $15 in cash (whether in hard currency or a promissory note is not known), in exchange for 2,000 shares of stock, whose face value was listed as $50 per share, thus giving him a total of $100,000 in shares. The $500 written on the right-hand page in a very light hand is likely additional funds he contributed to the coffers, although there is no date and no mention of additional shares. Perhaps it was a gift, or maybe a loan, for the bank was in constant need of cash. In any case, it was a valiant attempt to keep the bank afloat.²²

Among the most active purchasers of stocks on a repeated basis (contributors of cash for shares) were Joseph Smith Jr. and Sidney Rigdon. Frederick, as noted, seems to have contributed only twice: an initial $15 in cash and then a second contribution of $500 for a total of $515. In contrast, Joseph Smith contributed some fifty-one times for a net total of $1,310.18, while Sidney Rigdon is listed as having contributed on ten different occasions for a net total of $751.64. What should we make of the fact that President Williams apparently did not attend the founding meetings of the banking society or contribute on a consistent basis to the bank’s coffers? Is it a sign of his being uncomfortable with the arrangement? For comparison, below are listed the initial and subsequent cash contributions in exchange for stocks made by Sidney Rigdon and by the twenty women members of the society.

Left page

Right page

Women
Note: Shares are $50.00 each

Kirtland Safety Society Banknotes

It was undoubtedly by virtue of his position in the First Presidency and also because earlier he had been one of the members of the United Firm (the early financial arm of the Church) that President Williams participated as one of the leaders in the bank’s operation. One of the solid evidences for this comes in the form of his signature as secretary pro tempore (in place of Sidney Rigdon) on two extant Kirtland Safety Society banknotes. One is a $3 bill, preserved at the Church History Library, with the following information printed on one side only.

• A classical-style head in a circle at each corner; those on the left face left, those on the right face right. Between the heads on each end is a slight oval with the number 3 within it. The letter A is found at the top left. The No. 1379 (the numeral is handwritten) is found in the center top. A large engraving of a train appears in the upper right quadrant, a symbol of industry and progress.
• The words “THE KIRTLAND” are printed in an arched pattern and below them are printed “SAFETY SOCIETY,” each word on a slant, followed by a printed horizontal “antiBANKing co.” with the words “will pay on demand to O. Hyde or bearer” (all written by hand), “THREE DOLLARS” (printed), “Kirtland this 4 January 1837” (all written by hand), “F G Williams Sec P T” (signed by hand; the printed word “Cashr” is blotted out), “J. Smith Jr Tres” (or Treasurer, signed by hand; the printed word “Pres.” is blotted out).
• “Underwood Bald Spencer & Huffy N. York & Philad.a” (makers of the plates).

Digital scan of a Kirtland Safety Society banknote signed by “F G Williams Sec PT” and “J Smith Jr Treas.” Courtesy Rust Rare Coin, Inc.

As of 2012, there are facsimile copies of three Kirtland Safety Society Anti-Banking banknotes for sale at the Lake County Museum in Mentor, Ohio, in denominations of $1, $3, and $10. The $3 banknote was signed by Sidney Rigdon and J Smith Jr. on January 4, 1837; the $10 banknote had not been issued to anybody and was therefore not signed, numbered, or dated. The $1 banknote was signed by FG Williams Sec P T (Pro Tempore), also on January 4, 1837. The following information was printed on one side only of the $1 banknote.

• The numeral 1 appears in each corner within concentric circles, and in the open field in the center of the bill at either end within two ovals containing a classical-style head facing left, for a total of six numerals of 1. The No. 2344 (the numeral is written by hand) is found in the left top corner. The engraving of a train pulling double-decked open wagons filled with sight-seeing travelers is repeated at either end of the bill between the vertical numerals of 1. The train and people-filled wagons are perhaps a symbol of industry and progress, as well as a plug for some leisure time to enjoy the open spaces. The central and largest engraving is that of a man shearing a sheep; his companions behind him are washing them clean in a river. There is a substantial home attached to a barn seen in the distance.
• The following words appear in print in a gentle arch: “THE KIRTLAND SAFETY SOCIETY antiBANK will pay (written by hand) ONE DOLLAR (printed) on demand to W. Parrish or bearer (all written by hand) KIRTLAND OHIO (printed) 4 January 1837 (the date is written by hand) F G Williams Sec P T (signed by hand; the printed word “Cashr” is blotted out) J. Smith Jr Tres (or Treasurer, signed by hand; the printed word “Pres.” is blotted out).”
• “Underwood Bald Spencer & Huffy N. York & Philad.a” (makers of the plates).

There is a reference in the History of the Church to a banknote that F. G. Williams signed as president of the Kirtland Safety Society. On Monday, July 23, 1838, the last organized camp of member travelers from Kirtland to Missouri ran into some trouble over the banknote. “The camp began to move at a quarter past seven a.m., and came through the village of Rushsylvania, where we were threatened before our arrival with prosecution for ‘Kirtland Bank Money,’ signed by F. G. Williams, president, and Warren Parrish, cashier. Some of the company passed on from our encampment in the morning to find out what was intended against us, but no person made any attempt to stop any one, and we passed on in safety.”²³ Williams was appointed president of the bank when Joseph Smith resigned in June 1837.²⁴ The Prophet wrote, “The managers had in the mean time, appointed him [Warren Parrish] as Cashier, and F. G. Williams as President, and they managed the institution with a witness.”²⁵

Activities at the Bank for Which President Williams Was Paid

In Dr. Williams’s medical ledger, page 22, there is an account sheet for the “Bank,” which lists eight transactions. Under debits are the billed amounts he tendered for work or cash he had advanced to the Kirtland Safety Society. These include the cash he lent ($16), the days he labored (six, at $2 a day, for a total of $12), and the price he charged for work as a director of the bank (three, at $0.50 a day, for a total of $1.50).²⁶ The remaining $6.50, which was not identified, was probably for similar labor on behalf of the bank, either as director or in some other capacity, perhaps even medical. It is interesting to note that Williams was reimbursed or paid in cash. The total came to $36.