To raise more capital, Church leaders planned a bank. Like stores and mills, banks were multiplying in the 1830s. Twenty banks had been chartered in Ohio since 1830. In November 1836, Church leaders dispatched Cowdery to New York to purchase plates for printing currency, and Orson Hyde was sent to the state capitol in Columbus to apply for a character. On November 2, the Kirtland Safety Society bank was organized and began selling stock. As usual, Joseph thought big. Capital stock was set at $4 million, though the roughly 200 stock purchasers put up only about $21,000 in cash. Heber C. Kimball subscribed for $50,000 in shares for only $15. The rest of the issue was secured by land In actuality, the Safety Society was a partial “land bank,” a device New Englanders had once resorted to in their cash-poor, land-rich society. Land bank notes, secured by the farms of participants, gave landowners liquidity to initiate commercial ventures when capital was lacking. Unfortunately, the hybrid Kirtland bank—based on land and partly on specie—set up expectations for redeeming notes in hard money.

The disappointments began almost immediately. Cowdery brought back the plates and printed notes, but Hyde failed to obtain the charter from the Ohio legislature, which knew the pitfalls of underfunded banks. Hard-money Democrats saw the weakness in the Kirtland operation immediately. The Mormons adjusted by organizing themselves into an “anti-banking” company and, spiting the legislature, stamped the word “anti” before the word “banking,” and began issuing notes.

The issue of about $100,000 made no claim that the bills were legal tender; the notes were the promissory notes of a private company. In an earlier day, they would have been called a “medium of trade,” replacing barter as a means of exchange, allowing farmers to buy and sell by paying cash, instead of working out more complicated exchanges. In a simpler and more isolated society, where mutual trust was high, the scheme might have worked. In Kirtland, the bank failed within a month. Business started on January 2, 1837. Three weeks later, the bank was floundering, Skeptical (and perhaps mean-spirited) customers presented their notes for redemption, and the banks pitiful supply of liquid capital was exhausted within days. On January 23, payment stopped. From then on, the value of the notes plummeted, falling to one-eighth of their face value by February. All the investors lost their capital, Joseph as such as anyone. He had brought more stock then eighty-five percent of the investors. As treasurer and secretary and signers of the notes, Joseph and Rigdon begged the note holders to keep them, promising that the economy would benefit. In June, faced with complete collapse, both resigned. In August, Joseph publicly disavowed the Kirtland notes in the Church newspaper. The bank staggered on until November, long since moribund.

Meanwhile, Joseph’s enemies attacked. A local mill owner, Grandison Newell, a longtime enemy of the Mormons, entered a suit against Joseph for issuing bills of credit illegally. The charterless Kirtland Safety Society fell under the ban of an 1816 Ohio law forbidding private companies to issue money. The case was heard in March 1837 and held over to October, when Joseph was fined $1000, adding to his huge debt. Creditors everywhere were closing in on their debtors. The nationwide collapse of the speculative bubble in 1837 tightened credit throughout the country. The Mormons’ creditors were as zealous as any. Kirtland merchants refused to sell the Saints flour, driving up the price and forcing them to trade with neighboring towns. Sidney Rigdon told the Church in an April meeting that “the gentiles are striving to besiege the saints in Kirtland & would be glad to starve the saints to death.”

Everyone who accepted Safety Society notes at face value suffered from the collapse. Losses are estimated at $40,000 about the cost of the Kirtland temple, Mormons, who invested in the bank and trusted the notes, suffered most. Jonathan Crosby lacked the money to invest in the bank, but he took the bills in payment for his work. When flour rose to $10 a barrel, Crosby could not purchase provisions. “I was then compelled to stop work, and spent a day running about town trying to buy some food with Kirtland money, but could get nothing for it.” Emma Smith gave him a ham and forty pounds of flour.

The bank episode not only hurt the Saints financially, it tried their faith. The notes had their Prophet’s signature on the face. He had encouraged investment; his enthusiasm persuaded subscription. Wilford Woodruff marveled at Joseph’s vision of Kirtland:

Joseph presented to us in some degree the plot of the city of Kirtland . . . as it was given him by vision. It was great marvelous & glorious. The city extended to the east, west, North, & South. Steam boats will come puffing into the city. Our goods will be conveyed upon railroads from Kirtland to many places & probably to Zion. Houses of worship would be reared unto the most high. Beautiful streets was to be made for the Saints to walk in. Kings of the earth would come to behold the glory thereof & many glorious things not now to be named would be bestowed upon the Saints.

Carried along by the booster spirit that infected virtually every western town in these decades, Joseph promised too much. Town promoters William Ogden in Chicago or, later, William Larimer in Denver believed they could create something out of nothing and did. Overly optimistic, Joseph started construction on a new house. Other brethren went heavily into debt expecting to profit in the predicted boom. John Corrill remembered that some brethren “suffered pride to arise in their hearts, and became desirous of fine houses, and fine clothes, and indulged too much in these things supposing for a few months that they were very rich.”

A year earlier, in 1836, they had seemed to be succeeding. A visitor to Kirtland that fall was “astonished to see that a city had sprung upon since I was there last March. I should think there were between 100 and 200 houses (perhaps more) [and] new buildings, most of them are small and plain, but some of them are elegant.” By April 1837, when the bank was floundering, Joseph was still telling his people that “this place must be built up, and would be built up, and that every brother that would take hold and help secure and discharge those contracts that had been made, should be rich.” His hopes were doomed. When the effects of the Kirtland 1837 panic and the subsequent depression spread, any chance of Kirtland and its bank prospering was destroyed. Far from flourishing as their prophet had foretold, the Saints were caught in a downward spiritual of personal losses and narrowing opportunities.

Widespread apostasy resulted. The volatility in prices, the pressure to collect debts, the implication of bad faith were too much for some of the sturdiest believers. The stalwarts of Parley and Orson Pratt faltered for a few months. David Patten, a leading apostle, raised so many insulting questions Joseph “slaped him in the face & kicked him out of the yard.” Joseph’s counselor Frederick G. Williams was alienated and removed from office. One of the Prophet’s favorites, his clerk Warren Parish, tried to depose him. Heber C. Kimball claimed that by June 1837 not twenty men in Kirtland believed Joseph was a prophet.