Meanwhile Rigdon and Smith pushed ahead with another financial scheme. Given the accepted barter system of the day, when the basic unit of exchange was often a bushel of wheat, neither of the former farm hands had probably handled currency, stock certificates, or bonds. Yet they formulated a bold plan for financial salvation based on the belief that God would back them fiscally and bring success to their economic plans. According to Wickliffe Rigdon, his father initially opposed the idea of the Kirtland Safety Society Bank, arguing "it would not be legal as they had no charter." Others opposed the bank as well. William McLellin, at the time a member of the Quorum of the Twelve, noted that Smith, Rigdon, and other church leaders did not wait for a charter. They forged ahead thinking that "everything must bow at their nod—thus violating the laws of the land." McLellin, who left the church shortly after, said that the three witnesses to the Book of Mormon warned Smith against "this evil course" but managed only to rouse his anger.

The first recorded activity of the proposed Kirtland Safety Society Bank occurred early in August 1836 when Smith, Cowdery, and Rigdon visited a New York City firm to discuss acquisition of bank plates. Rigdon, whose name is listed first in the Safety Society stock ledger, purchased 2,000 shares of stock for $12 on 18 October 1836. The following month he added another 1,000 shares. Rigdon, Smith, and two others subsequendy held 3,000 shares each, making them the largest stockholders. The constitution for the depository was drawn up on 2 November 1836. Rigdon was elected president and Smith cashier. Cashiers at that time were commonly the chief operating officers, responsible for daily operations including transactions, bookkeeping, accounts, records, and personnel, answering to the president.

Despite their official designations, Rigdon and Smith were co-equals in the Kirtland Safety Society. Their signatures were affixed to nearly every bank note issued by the firm. After Smith's 1844 murder, church leaders under Brigham Young's direction closed ranks and retrospectively attributed full blame for the society's demise to Rigdon. Jedediah M. Grant, Young's close associate, wrote later that during the summer and fall of 1835 Rigdon commenced lecturing the saints on the subject of getting rich. His flights [of fancy] were so rapid that Elder Smith was unable to keep him within the bounds of reason, many others, also, protested against his course, Elder R[igdon] in order to convince the multitude that he was right, expatiated in the most extravagant manner on the… Scripture[s], applying them to the saints.

Rigdon's lectures, Grant insisted, were "directed to the passions of the people," and "caused many in indigent circumstances to imagine themselves rich." Furthermore, Grant continued, Rigdon's analogies, resemblances, illustrations, paintings, and figures, were superlatively brilliant, and captivating in the extreme, but alas! when a few months had passed away, they found that their riches were like Jonah's gourd, they had sprung up in a night, and perished in a day.… Elder Rigdon's imaginary schemes of wealth and grandeur having all vanished into insignificance, he was under the necessity of leaving Ohio, in search of another place of abode. He finally located himself among the Saints in Caldwell County, Missouri.

Grant's inaccurate assessment of Rigdon is but one example of misrepresentation characteristic of the Illinois period of Mormon history. Under the guise of denying polygamy, protecting "the Lord's anointed," or advancing the Quorum of the Twelve to the pinnacle of ecclesiastical power, the character of many good men and women was assailed by forces of fanatical religious allegiance.

But in October 1836, when Oliver Cowdery and Orson Hyde were dispatched on missions for the Kirtland Safety Society, Joseph Smith and Sidney Rigdon together inaugurated the chain reaction that ensued. Cowdery traveled to Philadelphia to obtain bank note plates from the firm of Underwood, Bald, Spencer, and Huffy. Hyde, a member of the pro-banking Whig party, traveled to Columbus to petition the Ohio thirty-fifth General Assembly for a bank charter. Cowdery's task was relatively easy: to make payment and bring back the plates. Hyde's chore, however, was impossible. Despite Hyde's political connections, the Kirtland community for the most part favored the Democrat party. All three legislators representing the Kirtland area were Whigs, politicians too savvy to support a Mormon bank in a Democrat stronghold. Furthermore, these three Geauga legislators were closely linked to Grandison Newell, a rabid anti-Mormon who in 1837 practically singlehandedly drove Rigdon and Smith from Ohio under a barrage of legal encumbrances.

Ohio passed a law on 27 January 1816 prohibiting the issue and circulation of unauthorized money. Although the prudent state legislature denied the petition to charter a bank, the press of short-term loans and other financial stresses caused Rigdon and Smith to abandon prudence and establish their financial institution under the guise of a "mutual stock association." On 2 January 1837 officers of the Kirtland Safety Society met in their new building just south of the temple. Assuming they could assign banking functions to a private corporation as had been done in other areas, they executed a revised "Articles of Agreement."

Rigdon was called as chair and Warren Parrish secretary. "After much discussion and investigation," the group reorganized. Its amended mission statement read:

We, the undersigned subscribers [Rigdon's name was first], for the promotion of our temporal interests, and for the better management of our different occupations, which consist in agriculture, mechanical arts, and merchandising; do hereby form ourselves into a firm or company for the before mentioned objects, by the name of the "Kirtland Safety Society Anti-Banking Company."

The list of subscribers was impressive: everyone from Elijah Abel to Lucy Smith to Brigham Young was listed. To emphasize Joseph Smith's endorsement of the new bank, the local newspaper contained his personal admonishment that "It is wisdom and according to the mind of the Holy Spirit, that you should call at Kirtland.… [W]e invite the brethren from abroad, to call on us, and take stock in our Safety Society."

On the morning of 6 January the firm first issued "stock certificates" in varying denominations from $1 to $100. By month's end, $15,000 in bank notes were circulating throughout the community as paper currency. As one study of the Safety Society noted, "The founders of the bank did not realize that because Oliver Cowdery arrived with pieces of paper with dollar signs and numbers on them which summed to $150,000 this did not add one penny to Kirtland's wealth." Mormons accepted Safety Society notes as legal tender because they believed the bank was created by God, that it had a sacred mission, and thus was invincible. Both Rigdon and Smith contributed liberally to the creation of this impression. Wilford Woodruff, present at the grand opening of the bank, wrote in his diary,

I…he[a]rd President Joseph Smith, Jr., declare in the presence of F. Williams, D. Whitmer, S. Smith, W. Parrish, and others in the Deposit office that he had received that morning the word of the Lord upon the subject of the Kirtland Safety Society. He was alone in a room by himself and he had not only [heard] the voice of the Spirit upon the Subject but even an audible 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.

Warren Parrish, Smith's personal secretary as well as an officer in the Safety Society, later wrote that the prophet said "that the audible voice of God instructed him to establish a Banking-Anti-Banking Institution, which, like Aaron's rod, should swallow up all other Banks…and grow and flourish and spread from the rivers to the ends of the earth, and survive when all others should be laid in ruins."

Within a matter of weeks the desperately-conceived nineteenth-century savings and loan institution began to flounder. The 12 January 1837 Cleveland Daily Gazette announced:

During the past two days an emission of bills from the society of Mormons, has been [p.185] showered upon us. As far as we can learn there is no property bound for their redemption, no coin on hand to redeem them with, and no responsible individuals whose honor or whose honesty is pledged for their payment. They seem to rest upon a spiritual basis. —Aside from the violation of the statute rendering them void, and of course the notes given for them, we look upon the whole as a more reprehensible fraud on the public, and cannot conceal our surprise that they should circulate at all. We do not object to private or company banking, as a system, provided it is done upon a system and made safe, but we consider this whole affair a deception.

Less than a week later, in a stronger denunciation, the 18 January 1837 Cleveland Weekly Gazette called the Kirtland Safety Society Anti-Banking Company a "stupendous fraud in the community" and editorialized further: "We know that Rigdon, a notorious hypocrite and knave, is at the head of the concern, for ourselves, we are anxious to see some guaranty that there is good faith and property in this banking matter-something to protect the community against a revelation that Joe Smith should take up what little money they have, and depart hence."

A consortium of Pittsburgh bankers was perhaps the first to test the soundness of the Kirtland bank. Loading a hand-satchel with Safety Society notes, a representative of the Pittsburgh group arrived in Kirtland and called on Rigdon. Producing the bundle of bills, he asked for their immediate redemption in coin. Rigdon declined to exchange, however, stating that the paper had been put forth as a "circulating medium for the accommodation of the people," and that it would be "thwarting that purpose to call any of it in."

The stock ledger of the Safety Society reveals that 200 persons subscribed to 79,420 shares of stock at a face value of approximately $3,854,000. Yet the paid-up cash reserve totalled a meager $20,725. Lacking sufficient cash reserves to back its currency, bank officials offered inflated real estate instead of coin for scrip exchanges when put to the test. On 27 January the Painesville Telegraph notified readers of Rigdon's announcement that no specie would be given for Kirtland bank notes thereafter. To improve cash flow, Smith as bank cashier publicly appealed to church members to acquire stock by payment of specie. He promised that "if the elders will remember the Kirtland Safety Society and do as they should Kirtland will become a great city." But people sensed they might be on a sinking ship and began trading off currency. By 1 February the $70,000 worth of notes were being discounted at 12.5 cents on the dollar.

On 9 April 1837, during Sunday services in the Kirtland temple, Rigdon sermonized that "the Presidency had used every means for the deliverance of the Church but as many of the Church had refused Kirtland Currency[,] which was their temporal salvation[,]… they [had] put strength in the hands of their enemies …and must suffer by it." Smith then "arose like the lion of the tribe of JUDAH," Wilford Woodruff recorded, and promised that those "who had turned traitors, [and] opposed the currency and consequently the prosperity of Kirtland," would be severely dealt with by the Lord.

Nonetheless, Smith and Rigdon soon found themselves entrapped in a hopeless vortex of legal entanglements. The 1 February 1837 Cleveland Weekly Gazette first raised serious questions about the Kirtland Safety Society bank which, despite several attempts, was never legally chartered. Recognizing this, Samuel D. Rounds, a front man for a prosperous Kirtland farmer and businessman, Grandison Newell, swore out a writ against Rigdon and Smith shortly after the bank's opening. The writ accused the two of illegal banking in defiance of the 1816 Ohio statutes. A hearing on 24 March 1837 postponed the trial until the fall session of the court. At the jury trial in October 1837 Rigdon and Smith were both found guilty and fined $1,000 each plus court charges. Although they appealed, both fled the state before their court date.

Rounds's writ was only one of a deluge filed against Rigdon, Smith, and other church leaders in 1837. E. D. Howe, editor of the nearby Painesville Telegraph, later explained the reasoning behind the legal harassment:

All [the Mormons'] vain babblings and pretensions were pretty strongly set forth and noticed in the columns of the TELEGRAPH. in view of all their gaseous pretensions the surrounding country was becoming somewhat sensitive, and many of our citizens thought it advisable to take all the legal means within their reach to counteract the progress of so dangerous an enemy in their midst, and many law suits ensued.

Despite the flurry of law suits, charges, countercharges, arrests, and personal threats submerging the bank, the institution continued operation with adjustments in its official staff until it closed its doors in November 1837. Joseph Smith was still signing bills as late as June 1837; Frederick Williams was then listed as secretary and Smith as treasurer. In March 1838 the Kirtland Safety Society Bank was numbered in newspaper accounts among seventeen "Broken Banks and Fraudulent Institutions." The bank's failure reverberated throughout the Mormon economy. Land speculators were unable to pay creditors, merchants who purchased goods on credit from Buffalo and New York became insolvent, consumers were unable to pay bills or make purchases, and the job market dried up because employers would not hire Latter-day Saints. The entire economy quickly folded.

Neither Rigdon nor Smith foresaw the disaster, nor did they predict the even greater disintegration of the American economy generally which came to be known as the "Panic of '37." As late as the spring of 1837 Smith was still expounding grand visions of Kirtland, such as one recorded by Wilford Woodruff:

Joseph presented 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, and 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 [were] to be made for the Saints to walk in. Kings of the earth would come to behold the glow thereof & and many glorious things not now to be named would be bestowed upon the saints.

May 1837 nevertheless brought disaster to the entire country. Within a single month 800 banks with $120,000,000 in deposits suspended operations. Historian Samuel E. Morrison wrote:

[Martin] Van Buren was no sooner seated in the White House than American mercantile houses and banks began to fail, and there were riots in New York over the high cost of flour. In May [1837], after almost every bank in the country had suspended specie payments, and the government had lost $9 million through the collapse of pet banks, the President summoned Congress for a special session. In the meantime, there was widespread suffering.

Even with a legitimate bank charter, the Kirtland Bank would likely have failed during the economic turmoil of 1837-42. But compliance with a charter could have prevented the rash of lawsuits lodged against Rigdon and Smith and may have diminished the mass apostasy in the wake of the failure as many Saints held the leaders personally responsible for the economic mayhem. Financial reverses sustained by church members were not the only cause for the anger and victimization many felt. The prophet and his spokesman had said that the bank, established by divine mandate, could not fail. Where now was the guarantee? Between November 1837 and June 1838 approximately 300 Kirtland members, representing perhaps 15 percent of all Mormons, withdrew or were excommunicated from the church. Included were nearly one-third of the church's leading officers, the three witnesses to the Book of Mormon, four members of the Quorum of the Twelve, three original presidents and three current presidents of Seventy, as well as Frederick G. Williams, a member of the First Presidency.