Pubdate: Tue, 30 Jan 2018
Source: San Francisco Chronicle (CA)
Copyright: 2018 Hearst Communications Inc.
Author: Peter Fimrite


State Treasurer John Chiang laid out a plan Tuesday to create a public
bank for marijuana merchants in open defiance of what he called an =93out

of step=94 Trump administration fixing to take the hose to California's

sizzling new herbal trade.

Chiang said he and California Attorney General Xavier Becerra have
initiated "a methodical and disciplined" cost-benefit analysis to
determine whether a public bank would work in California amid the
threat of a federal crackdown.

The move comes 30 days after California's recreational market
officially began, creating a financial windfall for marijuana
merchants and illuminating a serious problem. Store owners, growers
and distributors are being forced to use cash because most banks won't
open accounts for them while the federal government still considers
marijuana illegal.

The lack of banking also complicates the state's efforts to collect
taxes from the industry. Every month, thousands of business owners
head to the tax collector's office with piles of cash in shopping bags
and suitcases.

"We are contending with the emergence of a multibillion-dollar
cannabis industry that needs banking services, and a private banking
industry that is stymied by federal law in meeting the needs of the
new industry," said Chiang, who is running for governor. "The current
administration is out of step with the will of the people, not only
those in California, but the 29 states that have legalized either or
both medicinal and recreational-use cannabis."

Industry leaders estimate that 70 percent of the more than 1,600
recreational and medical dispensaries in the state are still paying
employees, suppliers and California's new 15 percent cannabis tax in

As revenues inevitably increase, they will be lugging larger stacks of
50s and 100s to the tax collector, a situation that everyone agrees
makes businesses vulnerable to thievery, violent crime, money
laundering and extortion.

The plan, recommended by an 18-member Cannabis Banking Working Group
that Chiang set up last year, is to conduct a feasibility study. The
treasurer's office would figure out the costs, benefits and risks of
such a system while the attorney general's office would determine
legal and regulatory ramifications.

The studies would make recommendations by the end of the year on the
structure and funding of such a bank as well as issues like lending
standards, the clearing of checks, insurance, interbank transfers, and
whether the bank would be brick-and-mortar or entirely online.

Chiang said his goal is to make sure the industry is fully above board
and "regulated to prevent sales to minors, to protect the public's
health and safety, and ensure cannabis businesses behave as
legitimate, tax-paying members of our economy."

The move comes less than a month after U.S. Attorney General Jeff
Sessions rescinded an Obama administration request not to prosecute
cannabis businesses in states where the drug is legal. The decision
would allow federal prosecutors to override state marijuana laws and
file criminal charges.

"The recent action taken by Attorney General Sessions threatens us
with new national divisiveness and casts into turmoil a newly
established industry that is creating jobs and tax revenues," Chiang
said. "Until the slow, clunking machinery of the federal government
catches up with the values and will of the people it purportedly
serves, states like California will continue to both resist, and more
importantly, to lead."

Chiang, who is working with 19 other states that have legalized
medicinal or recreational marijuana, said the feasibility study could
provide a framework for other jurisdictions.

It's not known whether a single public bank can solve a problem that
affects so many in the recreational cannabis industry, which is
expected to top $5 billion in sales this year.

"I am not convinced that a public bank in California will solve the
problems, but it definitely won't hurt," said Hezekiah Allen,
executive director of the California Growers Association, an advocacy
group for more than 1,000 marijuana farmers, business owners and
patients around the state. "The problem is antiquated laws at the
federal level. Congress must solve that issue, and it is incumbent on
everyone who cares about public safety here in our state to call on
our government on Washington, D.C., to provide relief."

California wouldn't be the first to establish a public bank. Chiang
said the first public bank was established in Genoa, Italy, in the
early 15th century "to eradicate certain bad practices of bankers."

North Dakota founded one in 1919 after private banks failed to
properly promote agriculture, commerce and industry, he said.

Chiang isn't the only one trying to solve the cash-only problem.
Oakland and San Francisco also have brought up the idea of a public
bank. Last week, state Sen. Bob Hertzberg, D-Van Nuys, introduced
legislation that would allow state-chartered banks, credit unions and
other financial institutions to open accounts and issue checks for
marijuana retailers.

Chiang urged California in November to hire armored cars to help pick
up the taxes, which industry experts predict will top $1 billion a
year. But many courier services are fearful of being targeted by the
federal Drug Enforcement Administration, and nothing has been done.
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