As the USA enters a new century optimism abounds, yet there is political scandal, stock expansion and war. In that same period politicians, fearful of the power and control the banks had on credit issuing pushed for a reform of the system to make it easier to borrow money. Eventually, these loose financial ties would combine with other causes of global proportions to create a financial mess. The year was 1837.
In 1836 the Church of Christ (later to be known as the Church of Jesus Christ of Latter-day Saints) has had a marvelous period of growth and had begun to stretch the missionary movement into Canada. The settlements in Missouri were growing again in Far West in the Mormon counties in Missouri. In the spring the Church dedicated the Kirtland temple.
However as summer turned to Fall the Church, through Joseph Smith and others set up a quasi Jacksonian bank called the Kirtland Safety Society. The KSS was set up to help fund the purchase of land for immigrant members as part of the United Order. Eventually it would become the Kirtland Safety Society Anti-banking Company. This organization would fund itself on credit which would be used to fund other real estate purchases but under-capitalized as it was it may have been doomed at the outset.
However, the bank failures, stock market crash and later depression of the period were quicker poisons which appeared to speed up the process. New York banks had over extended themselves through bad credit loans to fund development in the mid west. This combined with, as economics Professor Peter L. Rousseau described, “…a series of “supplemental” interbank transfers of public balances ordered by the Treasury under the Deposit Act of 23 June 1836 to prepare for the “official” distribution of $28 million of the $34 million federal surplus.”
To put the chickens home to roost finally was a call on specie from the banks by creditors in the UK who themselves were suffering a financial meltdown. For Mormons this financial derangement created a crisis which would lead to mass exodus of earlier saints from the church, put pressure on Northern Missouri as the remaining Saints abandoned Kirtland for Far West creating yet another pressure point for conflict as the push for more space for Mormon immigrants came up against the desires of other settlers.
Certainly an interesting situation in light of the issues with our current financial crisis.
Rousseau, Peter L. “Jacksonian Monetary Policy, Specie Flows, and the Panic of 1837” The Journal of Economic History, Vol. 62, No. 2 (Jun., 2002), pp. 457-488