Banks take on Sessions over legalized pot
The nation's banks are taking on Attorney General Jeff Sessions over pot with a big lobbying push to loosen federal restrictions on the surging legalized marijuana industry.
Emboldened by support from both President Donald Trump and Sen. Elizabeth Warren (D-Mass.) — two relentless foes on most other issues — top banking trade groups are pressing policymakers to make it easier for their members to serve cannabis businesses that are now legal in states like California and Colorado.
“If we’re not at a turning point, we’re very close to it,” said Cam Fine, the former head of the Independent Community Bankers of America trade association.
Even Jerome Powell, chairman of the Federal Reserve, is pushing for action on the issue.
“This is a very difficult area,” Powell said during a press conference this week. “It puts federally chartered banks in a very difficult situation. It would be great if that could be clarified.”
Lenders see the potential for lucrative business in working with the industry. So they’re backing proposals that would address conflicts between a growing number of permissive state laws and the longstanding federal ban on the sale of marijuana that has chilled banks’ appetite to offer accounts to pot-related businesses.
The unresolved legal questions have been heightened by Sessions’ public campaign against legalizing marijuana. That’s left many banks on the sidelines and forced pot businesses to carry out transactions in cash, making them a target for theft and violence.
The American Bankers Association believes “the time has come for Congress and the regulatory agencies to provide greater legal clarity to banks operating in states where marijuana has been legalized for medical or adult use,” a spokesman said.
“Those banks, including institutions that have no interest in directly banking marijuana-related businesses, face rising legal and regulatory risks, and ever increasing ambiguity and uncertainty, as the marijuana industry grows,” the spokesman said. The ABA’s membership includes thousands of large and small banks.
The Independent Community Bankers of America, which represents the nation’s smallest lenders, went a step further last week by endorsing for the first time a pot banking bill that would restrict federal regulators from penalizing banks that provide services to marijuana businesses.
The bill by Democratic Reps. Ed Perlmutter of Colorado and Denny Heck of Washington has more than 90 co-sponsors, including 13 Republicans. Sen. Jeff Merkley (D-Ore.) has introduced a companion bill with 17 co-sponsors, including 12 Democrats, four Republicans and Sen. Bernie Sanders (I-Vt.). The Credit Union National Association said Tuesday it also supports the legislation.
The community bank trade association’s decision to back the bill followed a decision by its board in March to get behind marijuana banking legislation, said Aaron Stetter, the group's executive vice president of policy and political operations.
One catalyst for the banks to act more aggressively was Sessions’ decision in January to withdraw Obama-era guidelines that curbed prosecutions of businesses that sold pot in compliance with state law.
“The fear now is the lack of the rules of the road,” Stetter said. “The rescission of the [Justice Department] memo just left too much doubt out there. What banks are always looking for is certainty.”
The move by Sessions also provoked Republican Sen. Cory Gardner of Colorado, where recreational marijuana has been legal since 2014. Gardner teamed up with Warren to introduce legislation last week that would carve cannabis businesses out of federal Controlled Substances Act restrictions if they're complying with state or tribal laws that permit the production and distribution of marijuana.
The bill, according to a letter of support from the Credit Union National Association, would give legal protection to financial institutions that accept deposits from and offer credit and payment services to marijuana-related businesses.
The bill’s introduction gave banks’ lobbying effort a fresh dose of star power from Warren, a liberal icon and potential 2020 presidential candidate, and conservative appeal via Gardner, who says it’s a chance to “express that federalism works” and give states the freedom to make their own decisions.
Trump kept the bill in the headlines June 8 when he said he “probably will end up supporting” the legislation — the latest in a series of comments at odds with Sessions and the Justice Department.
“When you have somebody with the national clout of Elizabeth Warren and somebody like Cory Gardner join forces, that sends a very, very strong signal that maybe the time is either here or rapidly approaching that the Congress will start to deal with this issue in a serious way,” said Fine, the former community bank lobbyist.
But the issue continues to polarize policymakers, even though lenders are going out of their way to avoid taking a position on whether marijuana should be legal in the first place. And while momentum is building, bank lobbyists want to see legislation that even more explicitly protects the industry. They also want regulators to come off the sidelines and outline their positions.
Some in the banking industry see the competing bills that have already been introduced as compatible efforts that should be further expanded.
The Trump administration’s position on the issue is inconsistent across the White House and agencies. Though Sessions revoked guidance in January, the Treasury Department’s Financial Crimes Enforcement Network, responsible for combating money laundering, has kept in place its 2014 guidelines clarifying how financial institutions can provide services to marijuana businesses while complying with anti-money laundering rules.
The continuity of the Treasury guidance has provided some degree of certainty to banks. Lawmakers from both sides of the aisle are urging the administration to preserve the policy, which also guides how regulators treat banks that provide services to the industry.
Legislation isn’t expected to advance until the next session of Congress, at the earliest. Perlmutter, the Colorado Democrat whose marijuana bill focuses on financial institutions, said his legislation would pass if brought to the floor, but that “several powerful Republican committee chairs” have thwarted his attempts to move it forward.
“We have reached a tipping point on this issue, and I believe it is only a matter of time before we are able to make real progress,” he said.