The decision of whether a Colorado credit union created just for the marijuana industry can open its doors ultimately could come from the nation’s top financial policymakers.
Although the board of governors of the Federal Reserve System in Washington, D.C., typically does not involve itself with local issues handled by the nation’s 12 regional reserve banks, a bank solely for marijuana money appears to be a different matter.
Whether the state-chartered Fourth Corner Credit Union gains a critical master account to operate is a determination already removed from bureaucratic hands at the Federal Reserve Bank of Kansas City, the regional banking home of several states, including Colorado, according to several people familiar with the process.
“It would be no surprise to us that the Fed would thoroughly review this, because any decision it makes has national ramifications,” said Jenifer Waller, vice president of the Colorado Bankers Association.
Where Fourth Corner’s application rests precisely is unclear, and those involved with the process aren’t saying. Spokesmen for the Federal Reserve similarly have refused to comment.
The credit union expected a decision on its application in early December, a matter some thought to be merely a formality because there’s no precedent for a state-chartered bank to be refused the account.
But others say the matter is too big to be decided by a regional board. That it could end up before Fed Chair Janet Yellen and the four other members of the board of governors — two additional seats are vacant — is not an unreasonable outcome, several banking experts say.
“I can assure you that any decision the Kansas City board makes will be only after consultation with the board in Washington,” said Bert Ely, a banking structure consultant in Alexandria, Va. “There will ultimately be some kind of discussion because of the national policy implications.”
As supervisors of the nation’s banking system, any decision to allow a bank specifically chartered to handle marijuana-derived cash logically would fall to the board, Ely said.
“Given the hot potato that marijuana is, I would say it would be a tough go,” Ely said of access to the banking system, “but it’s clearly an option.”
The decision is different than previously issued federal directives for existing banks wanting to work with marijuana clients. In those cases, there is a buffer — the bank itself — between pot funds and its access to the money system. The presumption is the banks know their customers well.
The Federal Deposit Insurance Corp., which regulates banks, and the Financial Crimes Enforcement Network, an arm of the Department of Justice, each has offered guidance — and caution — to bankers wishing to work with marijuana businesses.
That’s because marijuana remains illegal under federal law and banks could be complicit in money laundering simply by accepting those deposits.
As a result, far greater numbers of bankers have balked at the offer, and many others have stepped away entirely, closing client accounts at the mere concern they were marijuana-related.
“It’s precisely where we assumed it would end up,” said attorney Mark Mason, one of those behind the creation of Fourth Corner. “It’s an excellent question whether it will be at the full board, and we’re not for-sure it’s there, but it makes sense that it would.”
The outcome might not be so simple to predict, Ely said, despite the illegality of marijuana virtually guaranteeing a denial.
“There are serious public policy concerns raised here about the arbitrariness of certain kinds of businesses being denied access to the money system,” Ely said. “Despite it all, I can’t see the Fed giving Republicans yet another reason to beat up on them.”
And the Fed has another easy way to offer a solution, he said, by doing nothing at all.
“They can just let it sit,” Ely said. “It’s been complained about for decades, with bankers not getting any response, and no action is effectively a no.”
David Migoya: 303-954-1506, firstname.lastname@example.org or twitter.com/davidmigoya