Federal judge hears arguments on pot banking
The Denver Post
A federal judge heard arguments Monday about whether he should force the U.S. Federal Reserve to grant an account to a Colorado credit union created to serve marijuana-related businesses.
Mark Mason, an attorney for Fourth Corner Credit Union, argued that federal law gives the federal reserve no discretion and must grant the credit union a master account that essentially is a business license for lending institutions.
But Scott Barker, an attorney for the Federal Reserve Bank of Kansas City, said to do so would violate federal law that prohibits the sale of marijuana, among other issues.
The debate arose during oral arguments before U.S. District Judge R. Brooke Jackson in Denver.
Jackson took the request by the credit union to order the federal reserve to grant the master account under advisement and said he would issue a written decision.
His comments indicated, however, that he was leaning toward declining to issue the injunction.
“I would be forcing the reserve bank to give a master account to an illegal business,” Jackson said.
Colorado created Fourth Corner Credit Union last year to serve the marijuana industry. Without the ability to put money into banks, marijuana businesses operate on a cash-only basis, a practice that makes them vulnerable to crime.
The federal government is pushing back, though. An attorney for the U.S. Federal Reserve has asked a federal judge in Denver to dismiss a companion lawsuit by Fourth Corner, saying that chartering a bank for marijuana businesses would be “criminal.”
“Even transporting or transmitting funds known to have been derived from the distribution of marijuana is illegal,” said a motion.
Jackson grilled both attorneys about apparent flaws in their arguments.
He asked Mason whether the federal reserve would have to issue an account to a credit union catering to methamphetamine businesses if Colorado passed a law legalizing the use of methamphetamine.
Mason indicated that was an unfair question because the Colorado legislature would never do anything like that.
But Jackson said many people believe that marijuana is a dangerous drug.
“How do you reconcile your answer, ‘We just happen to think marijuana is a better illegal thing to manufacture than methamphetamine?’” Jackson said.
The judge also asked Barker why the federal reserve doesn’t negotiate with the credit union in a way that doesn’t violate federal law. They could include a clause that prohibited violation of federal drug laws.
“Are you saying the federal reserve is giving out accounts based on what people believe in?” Jackson asked.
Barker denied that the federal reserve was making morality judgments.
“It is not the purpose and intent of the Federal Reserve of Kansas to go after the marijuana industry,” he said.
Barker said there are several legal and business reasons not to issue a master account to the credit union, including the fact that the business is not insured.
The reserve would be taking on the risk of possibly being prosecuted for violating federal laws, he said.
Last year, the U.S. Treasury Department issued rules for how banks can accept pot money. But the Federal Reserve now says marijuana proceeds can’t go into the banking system.
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