In my studies of the Kirtland Banking Scandal, I’ve blamed the bank’s collapse on simple ignorance. Joseph Smith was a prophet, but didn’t know how to make a profit. However, in talking with Dr. Mark Staker, an anthropologist for the LDS Church History Library, I discovered some nefarious outside influences. A man by the name of Grandison Newell from a rival bank and competitor, purposely tried to induce a bank run. Combine that with the fact of a nationwide real estate bubble, and the Banking Panic of 1837 looks even worse than our Great Recession of 2008. Comparing the causes between 1837 and 2008 shows a similar cause: real estate speculation.
But it wasn’t just that. Banking competitor Grandison Newell actively tried to cause a bank run on the Kirtland Safety Society. Staker says,
While that charter’s still kind of out in limbo, one of those local opponents of theirs, Grandison Newell, he wants to put the bank out of commission, so he goes up and buys up all the banks notes that he can buy, and he comes in and he asks for specie, which is hard currency, gold and silver coins rather than the paper notes and the bank has to trade for those and so all of this currency, all of this specie that’s in the coffers of the bank in the vault, they’re trading out to Grandison Newell and he’s trying to create a run on the bank.
I think the actions of Newell and Johnson are not well known and under-appreciated in the bank’s collapse. The bank run worked (combined with John Johnson’s sale of bank property which sent real estate prices plummeting.) In our next podcast, we’ll ask this question. Given all these reasons for the collapse of the bank, why did Joseph take most of the blame?