Pubdate: Fri, 23 Oct 2015
Source: Honolulu Star-Advertiser (HI)
Copyright: 2015 Associated Press
Contact: 
http://www.staradvertiser.com/info/Star-Advertiser_Letter_to_the_Editor.html
Website: http://www.staradvertiser.com/
Details: http://www.mapinc.org/media/5154

MIXED SIGNALS FROM THE FEDS PUT POT SELLERS IN STICKY SPOT

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 Wednesday 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 obstacles 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 
Conti-Brown, 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 were to allow 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. By pushing for 
approval from the Federal Reserve, it was "as if Colorado enacted a 
scheme to allow trade in endangered species or trade with North 
Korea," the filing says.

The mixed signals have left Colorado's marijuana industry in a bind. 
Many shops still operate in cash, unable to accept credit cards or 
make other electronic transactions.

"We're still a Schedule I narcotic at the federal level," said Tyler 
Henson of the Colorado Cannabis Chamber of Commerce, which represents 
pot growers and retailers. "We can provide every Band-Aid imaginable 
at the state level, but until the federal government acts on this, 
we're stuck."

Deirdra A. O'Gorman, CEO of the still-unopened credit union, said 
she's more optimistic. A Federal Reserve account does not mean it is 
legitimizing an illegal industry, she said.

"We'll be able to figure this out sooner rather than later," O'Gorman said.

Conti-Brown, the banking expert, is doubtful. "I don't think the 
lawsuit is going to go anywhere," he said.

The presiding judge in the case, U.S. District Judge R. Brooke 
Jackson in Denver, has given no indication when he'll decide whether 
to hear the complaint filed by Fourth Corner.
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MAP posted-by: Jay Bergstrom