Pubdate: Fri, 23 Oct 2015
Source: Albuquerque Journal (NM)
Copyright: 2015 the Associated Press
Contact:  http://www.abqjournal.com/
Details: http://www.mapinc.org/media/10
Author: Kristen Wyatt, the Associated Press

FED SNUFFS MARIJUANA BANK

Colo.'s Try at Setting Up Credit Union for Pot Funds Rejected

DENVER (AP) - Colorado's attempt to create a bank to service its 
marijuana industry has suffered another setback by the federal 
government and could be facing an impossible dilemma.

The Federal Reserve - the guardian of the U.S. banking system - said 
in a court filing this week that it doesn't intend to accept a penny 
connected to the sale of pot because the drug remains illegal under 
federal law.

The stance appears to mark a shift in the position of the federal 
government. Last year, the U.S. Treasury Department issued rules for 
how banks can accept pot money.

"We're frustrated," said Andrew Freedman, director of marijuana 
coordination for Colorado Gov. John Hickenlooper. "We tried to do the 
most with the building blocks of instructions they sent us, set up 
the most rigorous solution. And we still are left with confusion."

The filing came in a legal battle between the Federal Reserve and the 
would-be Fourth Corner Credit Union, which was set up last year to 
serve Colorado's $700 million-a-year marijuana industry. The credit 
union can't open without clearance from the Federal Reserve, which 
said in its filing that "transporting or transmitting funds known to 
have derived from the distribution of marijuana is illegal."

Colorado chartered the Fourth Corner Credit Union after the Treasury 
Department issued its guidance last year on marijuana banking. Fourth 
Corner was designed to give the industry in Colorado a safe place to 
bank while paying steep fees to account for all the hoops set up by 
the Treasury Department.

The credit union then needed permission from the Federal Reserve to 
access the national banking system and perform electronic 
transactions. No dice.

The credit union now wants a federal judge to step in and order the 
Federal Reserve to change its mind.

"It's a phenomenal question about executive action," said Peter 
ContiBrown, a lawyer and banking historian at the University of 
Pennsylvania who is following the case.

On one hand, the Federal Reserve is standing in the way of the stated 
goal of the Treasury Department to "enhance the availability of 
financial services for, and the financial transparency of, 
marijuana-related businesses."

But by allowing pot industry money to mingle with funds from other 
national commerce, the Federal Reserve would be removing one of the 
final barriers to marijuana acceptance.

The federal government could hardly claim to consider weed illegal if 
its own banking system allows marijuana proceeds in the national 
banking system.

The Federal Reserve said in the latest filing that bankers won't be 
led away in handcuffs for taking marijuana money, but they don't have 
the right to put that money in the Federal Reserve.
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MAP posted-by: Jay Bergstrom