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(From Credit Union Times) – Senate Banking Chairman Mike Crapo (R) on Tuesday appeared to link legislation allowing marijuana banking to a proposal to outlaw an Obama Administration initiative that he said allowed banks and credit unions to refuse to serve controversial industries, such as gun dealers.
Opening a hearing on legislation that would provide financial institutions with a safe harbor if they do business with cannabis-related companies, Crapo did not endorse marijuana banking, although he said that a strong case had been that the issue must be resolved.
However, he added that Congress should consider legislation to outlaw initiatives such as the Obama Administration’s Operation Choke Point. That project was intended to hold financial institutions accountable for processing transactions they knew were fraudulent.
Critics have said that the program empowered financial institutions to decline to provide services for controversial businesses, such as gun dealers and payday lenders.
The NCUA has said it did not participate in Operation Choke Point and the Trump Administration has ended it.
Supporters of marijuana banking have said that they could get much-needed Republican support if they linked their plans to legislation to outlaw programs such as Operation Coke Point.
In fact, in the last Congress, the primary House sponsors of marijuana banking legislation, Democratic Reps. Ed Perlmutter of Colorado and Denny Heck of Washington asked the House Rules Committee to allow an amendment to Operation Choke Point legislation that would have allowed an amendment to link the two.
The Rules Committee, then controlled by the Republicans, rejected that plan.
Currently, because marijuana is illegal under federal law, financial institutions that provide services to cannabis businesses face possible sanctions from their regulators, including the NCUA.
The House Financial Services Committee has approved legislation sponsored by Perlmutter and Heck that would provide a safe harbor for financial institutions that provide services to marijuana-related businesses in states where cannabis is legal.
In the Senate, Sens. Cory Gardner (R) and Jeff Merkley (D) have introduced similar legislation.
Senate Banking ranking Democrat Sherrod Brown of Ohio endorsed the bill at the hearing Tuesday.
“We have a duty to look out for the people who work for these industries and the community they’re in,” he said as the committee opened its hearing.
Gardner and Merkley said the legislation is needed in states where marijuana is legal.
“In short, the states are leading on this issue, and the federal government has failed to respond,” Gardner told the Senate committee. “It has closed its eyes and plugged its ears and pretended the issue will go away. It won’t.”
He said that the $1.5 billion industry is almost all cash.
Merkley told the panel that, “As more states consider legalization of cannabis for medical and adult-use, it is critical that this Committee create a path for the financial sector’s role in serving the growing cannabis industry.”
In testimony prepared for the hearing, Rachel Pross, Chief Risk Officer of Maps Credit Union in Salem, Oregon, said her credit union decided to serve the cannabis industry because of its commitment to serve the underserved and in an effort to take large amounts of cash off the street.
Maps has $770 million in assets and Pross said it has served the cannabis business since 2014.
This year, Maps has received more than $529 million in cash deposits from marijuana-related businesses, she added.
“The current rift between federal and state law has left credit unions and other financial institutions trapped in a scenario where their mission to serve the financial needs of their local communities is directly pitted against the inability to have perfect information regarding every indirect business activity and the threat of federal enforcement action,” she said.
Pross represented CUNA at the hearing. CUNA and the American Bankers Association have endorsed the banking legislation, while NAFCU has not.
In a letter to the Banking Committee on Monday, Brad Thaler, CUNA’s Vice President of Legislative Affairs, said that the trade group supports congressional efforts to examine how the federal government can provide more clarity to credit unions.
Thaler said that the safe harbor legislation, while not a total solution, would be one step toward such clarity.
John Lord, the owner and CEO of LivWell Enlightened Health, a cultivator, manufacturer, and retailer of cannabis products in Colorado, said that he had to rent out a former bank building so he could store the company’s cash.
He added that he has had to travel to the Internal Revenue Service office in Denver with more than $3 million in cash in order to pay the company’s taxes.
“Over our 10 years of operations, we have had accounts closed at over a dozen financial institutions,” he said.
But a marijuana legalization opponent warned the committee not to approve legislation that would make it easier for cannabis-related businesses to obtain financial services.
“Make no mistake, a policy change around banking would have massive public policy and public health ramifications, so we are shirking our duties if we do not consider the full question,” Garth Van Meter, Vice President of Government Affairs for Smart Approaches to Marijuana, said, in his testimony.