A congressman is demanding to know what role a federal banking regulator had in the quick withdrawal of Oregon-based MBank’s offer to take on Colorado-based marijuana businesses.
U.S. Rep. Earl Blumenauer, D-Oregon, said he was “disheartened” to read a Denver Post story that described MBank’s decision to pull out only a week after it had announced it would bank legal pot businesses in Colorado.
“The article alluded to pressure from the Federal Deposit Insurance Corporation as a factor in MBank’s decision,” Blumenauer wrote FDIC Chairman Martin Gruenberg on Thursday. “If this is true, it raises serious questions about the application of federal financial oversight.”
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He said he wants the FDIC to “develop workable guidance” for financial institutions to be able to work with marijuana-related businesses.
At issue is MBank’s decision to work openly with marijuana businesses, a process it began in September with medical pot dispensaries and is now expanding to recreational-use stores.
Some saw the announcement as brazen because regulators often pressured banks to keep quiet about working with legal marijuana businesses.
“Everyone acknowledges the insanity and unfairness of requiring legal businesses to pay their taxes with shopping bags full of $20 bills,” Blumenauer wrote, noting that he saw MBank’s move as a glimmer of success.
No bank in Colorado openly works with the marijuana industry, and pot businesses often keep their banking relationships secret.
The Fourth Corner Credit Union has a state charter to cater specifically to the industry but is waiting for a master account from the Federal Reserve System to operate.
Blumenauer listed five questions for which he wanted answers, including whether the FDIC would issue working guidelines to banks wanting to work with marijuana businesses and whether the FDIC influenced MBank’s decision to back out of Colorado.
“Financial institutions need confidence that they can provide banking services to legitimate marijuana businesses without threat that their regulators will penalize them, threaten their deposit insurance, increase their capital requirements or force them to close accounts or stop providing services,” Blumenauer wrote.
The business side of recreational marijuana: Get an inside look at one of Colorado’s biggest pot retailers, Medicine Man — the ambitions of the family behind it and the evolution of their business amid changing state regulations
MBank CEO Jef Baker declined to comment about Blumenauer’s letter Thursday.
Blumenauer represents the district in which MBank is located, just outside of Portland, Ore.
The U.S. Department of Justice last February issued guidelines that would allow banks to work with legal marijuana stores but without giving wholesale assurances against prosecution, which has kept many institutions from stepping into the market.
MBank pulled out of Colorado after FDIC regulators, who had given “tacit approval” to the plan previously, backed away and said the move was simply too risky, people familiar with the decision said.
“The allegations in The Denver Post that the FDIC appears to be governing by informal fiat runs counter to these steps taken by the administration to date,” Blumenauer wrote.
Oregon voters recently approved recreational marijuana sales. Its northern neighbor, Washington, began legal recreational sales in July, seven months after Colorado.
Blumenauer has partnered with U.S. Rep. Jared Polis, D-Boulder, in offering federal legislation to remove marijuana from the U.S. Drug Enforcement Agency’s list of controlled substances and facilitate a federal tax on its sales.
It’s not the first time U.S. lawmakers have squared off with a federal agency over its position regarding marijuana and banking.
In May, the Financial Crimes Enforcement Network — or FinCEN, an arm of the Justice Department — had to answer questions about its guidelines for banks to work with the pot industry.
Sen. Dianne Feinstein, D-Calif., and Sen. Chuck Grassley, R-Iowa, said the move appeared to usurp federal laws that keep the possession and sale of marijuana illegal even though 23 states and the District of Columbia have legalized its sale in some form.
FinCEN said it did not encourage the practice but merely offered guidelines to ensure the business relationship was transparent.
David Migoya: 303-954-1506, firstname.lastname@example.org or twitter.com/davidmigoya