Pubdate: Tue, 29 Dec 2015
Source: Denver Post (CO)
Copyright: 2015 The Denver Post Corp
Contact:  http://www.denverpost.com/
Details: http://www.mapinc.org/media/122
Author: Kirk Mitchell

JUDGE DELAYS RULING ON POT BANKING

Jackson Urges the Fed and a Marijuana Credit Union to Reach Accord.

A federal judge said Monday he sympathizes with pot businesses faced 
with contradictory regulations, but he expressed misgivings about 
forcing federal officials to approve a marijuana credit union.

U.S. District Judge R. Brooke Jackson made it clear at a court 
hearing that he was not inclined to issue an injunction forcing the 
Federal Reserve Bank of Kansas City to grant a master account to 
Fourth Corner Credit Union.

"I would be forcing the reserve bank to give a master account to a 
credit union that serves illegal businesses," Jackson said.

Colorado created Fourth Corner Credit Union last year to serve the 
marijuana industry.

The credit union had filed a lawsuit asking the judge to grant it a 
master account, which essentially is a business license for lending 
institutions. Without the ability to put money into banks, marijuana 
businesses operate on a cash-only basis, a practice that makes them 
vulnerable to crime.

Jackson took the credit union's request under advisement and said he 
would issue a written decision.

The judge criticized memos by the U.S. Treasury and Justice 
Department that have sought to clarify pot regulations as "nothingburgers."

He said if he were a member of Congress, he would vote in favor of 
allowing pot banking, but he is a federal judge and must uphold 
existing laws. As long as pot is considered a Schedule I drug, which 
puts it in a category that is considered a greater risk than cocaine, 
it is illegal to manufacture and trade marijuana in the U.S., he said.

Jackson repeatedly urged attorneys for the Federal Reserve and Fourth 
Corner to negotiate a resolution under the stipulation that any 
agreement they reach follows federal law.

Mark Mason, an attorney for Fourth Corner, argued that federal law 
gives the Federal Reserve no discretion and that it must grant the 
credit union a master account.

But Scott Barker, an attorney for the Federal Reserve Bank of Kansas 
City, said that would violate federal law prohibiting the sale of 
marijuana, among other issues.

Federal Reserve attorneys have asked Jackson to dismiss a companion 
lawsuit by Fourth Corner, saying that chartering a bank for marijuana 
businesses would be "criminal."

"Even transporting or transmitting funds known to have been derived 
from the distribution of marijuana is illegal," a motion said.

Jackson grilled both attorneys about apparent flaws in their arguments.

He asked Mason whether the Federal Reserve would have to issue an 
account to a credit union catering to methamphetamine businesses if 
Colorado passed a law legalizing the use of methamphetamine.

Mason indicated that was an unfair question because the Colorado 
legislature would never do anything like that.

But Jackson said many people believe that marijuana is a dangerous drug.

"How do you reconcile your answer, 'We just happen to think marijuana 
is a better illegal thing to manufacture than methamphetamine'?" Jackson asked.

The judge also asked Barker why the Federal Reserve doesn't negotiate 
with the credit union in a way that doesn't violate federal law. They 
could include a clause that prohibited violation of federal drug 
laws, he added.

"Are you saying the Federal Reserve is giving out accounts based on 
what people believe in?" Jackson asked.

Barker denied that the Federal Reserve was making morality judgments.

"It is not the purpose and intent of the Federal Reserve of Kansas to 
go after the marijuana industry," he said.

Barker said there are several legal and business reasons not to issue 
a master account to the credit union, including the fact that the 
business is not insured.

The Federal Reserve would be taking on the risk of possibly being 
prosecuted for violating federal laws, he said.

Last year, the U.S. Treasury Department issued rules for how banks 
can accept pot money. But the Federal Reserve now says marijuana 
proceeds can't go into the banking system.
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MAP posted-by: Jay Bergstrom