Between Pot and a Hard Place: Fed Rejects Colorado Marijuana Bank

Between Pot and a Hard Place: Fed Rejects Colorado Marijuana Bank

DENVER -- Colorado's attempt to create a bank to service its marijuana industry has suffered another setback by the federal government and could be facing an impossible dilemma.

The Federal Reserve — the guardian of the U.S. banking system — said in a court filing Wednesday that it doesn't intend to accept a penny connected to the sale of pot because the drug remains illegal under federal law.

The stance appears to mark a shift in the position of the federal government. Last year, the U.S. Treasury Department issued rules for how banks can accept pot money.

"We're frustrated," said Andrew Freedman, director of marijuana coordination for Colorado Gov. John Hickenlooper. "We tried to do the most with the building blocks of instructions they sent us, set up the most rigorous solution. And we still are left with confusion."

The filing came in a legal battle between the Federal Reserve and the would-be Fourth Corner Credit Union, which was set up last year to serve Colorado's $700 million-a-year marijuana industry.

The credit union can't open without clearance from the Federal Reserve, which said in its filing that "transporting or transmitting funds known to have derived from the distribution of marijuana is illegal."

Colorado chartered the Fourth Corner Credit Union after the Treasury Department issued its guidance last year on marijuana banking. Fourth Corner was designed to give the industry in Colorado a safe place to bank while paying steep fees to account for all the hoops set up by the Treasury Department.

The credit union then needed permission from the Federal Reserve to access the national banking system and perform electronic transactions. No dice.

The credit union now wants a federal judge to step in and order the Federal Reserve to change its mind.

"It's a phenomenal question about executive action," said Peter Conti-Brown, a lawyer and banking historian at the University of Pennsylvania who is following the case.

And the banking issue between legal marijuana and the federal government continues to rage on. THIS is why the federal government needs to address this issue soon. It is creating untold amounts of frustrations and screwing so many people over.

On one hand, the Federal Reserve is standing in the way of the stated goal of the Treasury Department to "enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses." But by allowing pot industry money to mingle with funds from other national commerce, the Federal Reserve would be removing one of the final barriers to marijuana acceptance.

The federal government could hardly claim to consider weed illegal if its own banking system allows marijuana proceeds in the national banking system.

When idiotic bureaucracy collides... Man this is frustrating! Just legalize it already! As I posted yesterday pot support is STILL at an all time high and is likely to continue to grow. What is the big deal already? I mean at least ACT like you care about what the citizens want. How about starting descheduling proceedings at the VERY least? The fact that marijuana is still listed as a Schedule 1 drug is literally a joke across the country. I mean the Senate is supporting medical marijuana use among veterans! I mean at what point do you say that this is improperly Scheduled?

It's delicate in congress- if you re-schedule the drug, many of those crooks will lose their bribes from the pharma industry.

What kind of country would it be without one percent of the population manipulating the world to deepen their pockets?

a reply to: lordcomac

I was under the impression that the alcohol lobby was more interested in keeping it illegal than drug companies.

when you remove all doubt the punks in decision making positions are there for themselves and no one else. This issue ought to be the rallying point for a new continental congress or whatever they call it.....

now this is a bit confusing. The FEDERAL government collects taxes on the sale of this correct?
If that is the case, then where do they put that money?

a reply to: ratsinacage

What really gets me is how the presidential candidates are trying to treat the marijuana issue like it was treated for years beforehand. Only two candidates (one from each side of the aisle) support full out legalization. All the others are still terrified to show support for it even though candidates who do are celebrated for it.

Can't they just join the new church of pot? Would that not give them more rights?

Government bureaucracy at it's finest...

The thing is this type of ineptitude is very common in the business world when dealing with federal and state regulations across a variety of industries. However, most Gruber voters don't see it in their daily lives, so it isn't until you see more general interest stories like this to where the low info voter starts to see why so many of us conservatives can't stand government regulations.

a reply to: Krazysh0t

"Catch 22" anybody?

Any congressional legislators who say that it should be up to the States, (while refusing to legalize it at the federal level) are the biggest hypocrites you will ever see because they know damn well that the States are powerless so long as it remains illegal at the federal level.

Maybe we need to take a tip from Grover Norquist and create a legalization pledge for our politicians to sign before we elect them.

Or, maybe we need to organize a "Million Man Marijuana March" in DC. (BYOW, of course)

On a more serious note, I don't think our legislators have the balls to act on this issue until we have a POTUS who is willing to lead the charge and/or take the heat.

Which is why I'm currently supporting the Bernie Sanders campaign.

The coming full-country Canadian legalization will likely put quite a bit of new pressure on these topics in the U.S., Mexico, and Central and South America. The Federal Reserve is not part of the U.S. government, so the Fed probably wants a federal judge to step in and make the decision on this question, putting the ball in their court and not making this kind of change by themselves. It'll work out at some point soon, there is too much hard cash laying around for the process not to evolve.

originally posted by: Edumakated
Government bureaucracy at it's finest...

The thing is this type of ineptitude is very common in the business world when dealing with federal and state regulations across a variety of industries. However, most Gruber voters don't see it in their daily lives, so it isn't until you see more general interest stories like this to where the low info voter starts to see why so many of us conservatives can't stand government regulations.

It isn't govt. bureaucracy that's preventing legalization of marijuana. If anything, it's "Corpaucracy" or corporate control over our legislators.

I'm sure that the Federal Reserve is just complying with current law. They don't write the law, nor do they have the authority to change it.

The blame for this fiasco lies squarely in the lap of our legislators who refuse to recognize the will of the people and address it head on.

originally posted by: AugustusMasonicus
a reply to: lordcomac

I was under the impression that the alcohol lobby was more interested in keeping it illegal than drug companies.

Probably both do.

And in the end, it appears, the Federal Reserve will maintain the status quo of prohibition.

originally posted by: Salander

And in the end, it appears, the Federal Reserve will maintain the status quo of prohibition.

This is not up to the Federal Reserve to remedy.

originally posted by: Flatfish

originally posted by: Edumakated
Government bureaucracy at it's finest...

The thing is this type of ineptitude is very common in the business world when dealing with federal and state regulations across a variety of industries. However, most Gruber voters don't see it in their daily lives, so it isn't until you see more general interest stories like this to where the low info voter starts to see why so many of us conservatives can't stand government regulations.

It isn't govt. bureaucracy that's preventing legalization of marijuana. If anything, it's "Corpaucracy" or corporate control over our legislators.

I'm sure that the Federal Reserve is just complying with current law. They don't write the law, nor do they have the authority to change it.

The blame for this fiasco lies squarely in the lap of our legislators who refuse to recognize the will of the people and address it head on.

The Fed doesn't want the liability, so I don't really see any issue with their stance. My point though was that you see these kind of conflicts all the time where congress won't act to make a change or you have unelected bureaucrats basically making legislation through regulation that might conflict with some other legislation or regulation somewhere else. Yes, a lot of it is driven by parties with other agendas but it is enabled because we've created this bureaucratic beast.

a reply to: AugustusMasonicus

I agree completely. It is ironic, but somehow not surprising, that the Fed would be the party to uphold the pernicious prohibition.

originally posted by: Salander
I agree completely. It is ironic, but somehow not surprising, that the Fed would be the party to uphold the pernicious prohibition.

It is not just the Federal Reserve but all parts of the Federal Government; Treasury, Justice Department, etcetera.

originally posted by: AugustusMasonicus

originally posted by: Salander
I agree completely. It is ironic, but somehow not surprising, that the Fed would be the party to uphold the pernicious prohibition.

It is not just the Federal Reserve but all parts of the Federal Government; Treasury, Justice Department, etcetera.

Yeah, I'm sure some prosecutors could see legalization as getting rid of their jobs. However, even with it legal, I'm sure there will be plenty of work to go around to prevent the mob and other unsavory characters from opening legitimate dispensaries.

originally posted by: network dude
now this is a bit confusing. The FEDERAL government collects taxes on the sale of this correct?
If that is the case, then where do they put that money?

Since it is still "illegal" at the federal level, I don't see how the feds could tax it. The state does and does heavily. Maybe that's where the problem lies. Feds are jealous of all of that sweet green. Money not grass, that is.

originally posted by: the owlbear

Feds are jealous of all of that sweet green. Money not grass, that is.

Get the lobbyists involved. K Street Kronic.

Over here in Washington State, companies that deal in pot also have to deal in cash. This results in a lot of cold, hard cash being trucked around. I wonder how they translate that to electronic money? Is the cash worthless if it can't become electronic?