Pubdate: Sun, 01 Sep 2019
Source: New York Times (NY)
Copyright: 2019 The New York Times Company
Author: Christopher Caldwell


The legalization of marijuana as a medicine in 33 states, 11 of which
allow its use as a recreational drug, has made weed a dynamic American
industry, among the economy's fastest-growing sources of new jobs.
California alone, with $3.1 billion in projected marijuana sales for
this year, has a legal market as large as that of any country on the

Entrepreneurs grumble nonetheless. Not since Ronald Reagan ran for
president have American newspapers been so full of anecdotes about
heroic jobs-creating businessmen stymied by regulation.

Their gripe concerns banking. Marijuana may be legal in many states,
but it remains illegal under federal law, which classifies it,
implausibly, as a highly dangerous Schedule 1 narcotic. A bank that
does business with weed growers or sellers therefore puts its assets
at risk. Proprietors of marijuana businesses find it hard to start
401(k) retirement plans for workers and to get insurance. They can't
avail themselves of federal bankruptcy protection. And they need to
conduct a lot of their business in cash.

To fix this problem, Congress is considering the Secure and Fair
Enforcement (SAFE) Banking Act, which would create a "safe harbor"
against federal bank regulators in states where marijuana has been
legalized. The bill has 206 co-sponsors and breezed through the
House's Financial Services Committee in March. Treasury Secretary
Steven Mnuchin backs it. So does Representative Maxine Waters,
Democrat of California. It appears to be a matter of bipartisan logic
and common sense.

It is true that the available banking for marijuana business is
unstable, most of it provided by state-chartered banks and credit
unions that do not have the federal government as their primary
regulator. It is also true that marijuana-related banking is expensive
- - $5,500 a month for a checking account at one bank in Massachusetts,
according to The Boston Globe.

But reform could make matters worse. Big investment banks and
corporations want a more streamlined banking regime in order to scale
up marijuana operations. Many members of Congress have rallied behind
the SAFE Banking Act not because their voters care about pot but
because their donors care about money. The old hippie who grows a
couple of plants in his backyard in Santa Cruz is not the guy who is
paying the former House speaker John Boehner to lobby on behalf of the
National Cannabis Roundtable.

Relatively well-capitalized pot businesses are already turning into
big corporations. Last year Bank of America and Goldman Sachs
reportedly advised Constellation Brands on a $4 billion investment in
Canopy Growth, a "multifaceted cannabis company" headquartered in
Ontario. (Marijuana is legal nationally in Canada.) On Tuesday the
retired New England Patriots tight end Rob Gronkowski revealed his new
role as a spokesman for Abacus, a corporation that sells
cannabis-derived health products.

Any businessman would want in on marijuana. It is a legal drug, and a
legal drug is a gold mine. If it is addictive, it creates a compulsion
to purchase. As we learned from the tobacco hearings of the 1990s, not
all businessmen can resist exploiting their customers' compulsions.
The National Institute on Drug Abuse says marijuana "can" be
addictive. But even if a drug is merely "habit forming," as many
doctors believe marijuana to be, it creates an unlevel playing field
between seller and consumer. The more "efficient" the market, the more
powerful this inequality.

Whether or not marijuana's Schedule 1 classification makes sense
medically, it serves a purpose politically. Often government
intervention requires thwarting businessmen's antisocial impulses, not
just unleashing their productive ones. Politicians are reluctant to
admit to being "anti-business." So a lot of useful regulation gets
carried out under pretexts.

Adding sophisticated banking to the pot business will do more than
make it more "logical." It will also turn an artisanal space into a
corporate one. It will change what we mean by "legalized marijuana."
In referendum questions over the past decade, Americans have been
making big decisions based on such thoughts as, "Should my 19-year-old
daughter be put at risk of prison because she was caught with a joint
at the freshman mixer?" Voters in many states have seen legalizing
marijuana as the prudent choice. Corporations didn't enter into it.

But corporations bring to the fore questions of size, power and
accountability. Do we want multinational businesses using vast
marketing budgets and gifted creative teams to teach our children that
smoking a lot of pot is somehow sexy, or manly, or sophisticated? Do
we want labs to come up with new flavors and varieties that turn
pot-smoking into an adventure in connoisseurship and a way of
demarcating oneself by class? Would we be content with a Microsoft of

You might still want pot to be legal under these circumstances, but it
seems likely that sentiment in its favor would weaken, especially in
an age when Joe Camel and OxyContin have become symbols of how
corporations market legal drugs. Losing popular support could cost
marijuana its legal status. Or it could simply mean an embattled
legality, maintained through some of the tactics other outcast
interests have used: lobbying, regulatory capture, the funding of
tendentious research.

Good political outcomes are often accidental. Institutions get built
at some arbitrary resting place between two clashing logics. Our
current marijuana banking regime is the result of such an accident. It
is where the half of the country that wants a retreat back to
criminalization meets the half that wants a rush ahead to
megamarijuana. For now it may be the country's best way to avoid a
premature and destructive consolidation.

Christopher Caldwell is a contributing opinion writer for The New York 
Times and a contributing editor at The Claremont Review of Books. He is 
the author of "Reflections on the Revolution in Europe: Immigration, 
Islam and the West" and the forthcoming "The Age of Entitlement: America 
Since the Sixties."
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