Pubdate: Sun, 14 Sep 2014
Source: Denver Post (CO)
Copyright: 2014 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: David Migoya
Page: 1K

GREEN LIGHT DOESN'T SUFFICE

No One Wants to Roll Out the Idea Until Assurances Are Made.

Despite 11th-hour success at pressing Colorado legislators to pass a 
measure that would allow the marijuana industry to create the world's 
first pot-banking cooperative, no one has officially attempted to create one.

Even with the flurry of international publicity that swirled last 
spring around the groundbreaking effort-one that theoretically would 
allow pot businesses to band together and form their own banking 
entity - there has been lukewarm interest in giving it a try without 
first knowing it's not a useless effort.

As such, there hasn't been a formal application to the federal agency 
that would have to approve one.

But that doesn't mean nothing's happening.

"We continue to see some movement, but any specifics and those (who 
are) involved is confidential," said Andrew Freedman, Colorado's 
director of marijuana coordination and one of the forces behind House 
Bill 1398, the pot finance coop measure.

What is happening, according to interviews with several people 
familiar with the process, is that a consortium of businesspeople 
connected to the marijuana trade has committed to giving this 
credit-union-type idea a try, but only if the U.S. Federal Reserve of 
Kansas City gives them a fair hearing.

For now, the Federal Reserve hasn't said one way or the other- 
probably because there hasn't been a formal application for access to 
the nation's financial system.

"It's a very small game of chicken right now, with neither side 
wanting to commit too much without having a sense of howit will play 
out," said one businessman who's familiar with the group.

That leaves pot businesses in precisely the same place as before the 
legislation-unable to acquire banking services without keeping quiet 
their affiliation to the drug that remains illegal under federal law.

And until someone does apply formally, state regulators tasked with 
working up the rules that would govern the cooperative are stalled.

"We get questions from interested parties, but no one has applied," 
said Chris Myklebust, Colorado's commissioner of its division of 
financial services, a part of the Department of Regulatory Agencies. 
"Rule-making wouldn't occur until after access to the federal system 
was granted and an application is approved by me."

The Federal Reserve said it won't comment on applications made for 
access to the financial system, but others familiar with the process 
said as of now - four months after Gov. John Hickenlooper signed it 
into law-none has been made.

Lauded by proponents as a means for the industry and lawmakers to 
prove they had done all they could to solve a chronic lack-of-banking 
issue, and panned by critics for being a last-minute political ramrod 
that was too complex to solve in so short a time, it remains to be 
seen whether Colorado's pot-banking bill has proven a waste of time.

"I think because the Federal Reserve would likely never give an OK, 
it's proving to be a futile effort," said Rep. Libby Szabo, R-Arvada, 
a critic who thought HB 1398 shouldn't have been a last-minute effort.

"No matter what we do, the federal government still views marijuana 
as illegal. Period," she said.

Bill sponsor Sen. Pat Steadman, D-Denver, admitted surprise when told 
a group of business people was testing the water, if only a little bit.

"That's better than I had hoped for. I thought it was simply going to 
be the state to go it alone and convince the Federal Reserve to allow 
it," Steadman said."That suitors are lined up, that's actually good news."

The legislation is still scant in details, with a 
cart-before-the-horse sense about it. A group cannot apply to 
Myklebust's office for approval until it has gotten tacit approval 
from the Federal Reserve board.

And the Federal Reserve doesn't usually do anything tacitly. But it 
also can't approve access to the financial system without a formal 
application, and only a real bank or financial service can apply.

"I'm sympathetic to their desire not to waste their time, considering 
the work that will go into it," Steadman said of the businessmen 
leery of any formal application. "If the answer is 'Hell, no,' it 
would be nice to know that up front. I had a sneaking suspicion it 
could all end that way."

For their part, bankers point out how they didn't think the law would 
do anything other than highlight a problem and offer no solution.

"The state cannot issue a charter for a cooperative until an 
application is approved by the Fed, and you can't apply to the Fed 
unless you're a financial institution in the first place, or a 
business owned by one," said Jenifer Waller, vice president of the 
Colorado Bankers Association. "All along, we said we didn't think it 
would accomplish anything. The same laws that hinder institutions 
from banking the marijuana industry would hinder approval from the 
Federal Reserve."
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MAP posted-by: Jay Bergstrom