The Banking Industry in 1837

Banking exploded in the United States during the 1830’s in response to the demand for credit, loans, and safekeeping of specie. In fact there were a number of Ohio banks already operating with illegal charters or no charters at all. The banking industry was rapidly becoming out of control. When Democrats gained control of the Ohio legislature they attempted to quell the problem, it was during this time that the Church of Jesus Christ of Latter-day Saints attempted to gain a charter for their proposed bank. The charter was denied but even after this problem there was generally widespread support for the bank and the doors were opened for business on January 2, 1837. Almost immediately problems began, first by other banks refusing to accept the Kirtland notes and then by enemies of the Church gathering enough notes to initiate a run on the bank which had insufficient backing to redeem the notes. Soon after, the local newspapers picked up the story, and after publishing the news, caused the final blow to the bank before it had been in operation even a month. The situation went from bad to worse early in 1837 when there was a nationwide panic dubbed ‘the panic of 1837’ that began in New York and quickly spread. Nationwide, hundreds of banks and millions of dollars were lost. There was widespread speculation in banks including the Kirtland bank. Church officials, including Joseph Smith, urged the Saints to invest and support the bank, but all efforts failed. Eventually the bank closed it doors in November of 1837 but it was essentially out of business long before that.

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