By Mark Goldfogel
With our appeal underway in the David vs.Goliath battle over cannabis banking, it’s time that The Fourth Corner Credit Union responds with our thoughts regarding Judge Jackson’s ruling in favor of the Federal Reserve Bank of Kansas City, and, shares our plans going forward.
While “Round 1” may have gone to Goliath, this battle is far from over. Judge Jackson actually helped us in many ways, despite denying us the victory. Some criticized our efforts at Fourth Corner Credit Union, claiming that the judge’s decision was obvious, and that by bringing the suit, we actually caused harm to the industry.
Our request was for equal access to the payment system — a Master Account — which any other financial institution enjoys. It is important to point out that Fourth Corner’s intent is not to deal with marijuana related businesses (MRBs) exclusively. Our charter includes appropriate (legal) MRBs as well as ancillary businesses and individuals that have a common interest in hemp and cannabis.
The Federal Reserve Bank of Kansas City’s lawyers argued that allowing a credit union in support of cannabis is akin to a bank supporting endangered species trafficking or North Korean terrorism. The problem isn’t with the argument, but rather, with the assumption that cannabis consumers and businesses should be considered criminals.
“No crime is being committed”
Within the state of Colorado, no crime is being committed in generating the $1.2 billion in expected 2016 revenue from state licensed stores and its trickle impact. These are highly regulated businesses with extensive and invasive licensing procedures required by the State of Colorado. The hypocrisy continues because the Federal Reserve Bank openly acknowledges that it accepts money today from existing financial institutions, just not us.
This begs the question: Who is responsible for choosing what industries are supported by the financial rails of commerce, the Federal Reserve Bank of Kansas City, the State of Colorado, or the Federal Government?
Integral to Fourth Corner Credit Union’s argument is the fact that a financial institution can be either state or federally chartered. The Federal Reserve Bank’s directive from the Monetary Control Act of 1980 demands that the Federal Reserve provide non-discriminatory access to the payment system. It cannot deny access to an institution which a state has thoroughly vetted and authorized to conduct business within that state. This is a separation of the Federal Reserve’s duties and those of a State that is not dissimilar to our separation of church and state.
Fourth Corner argued that in passing the Monetary Control Act, it was Congress’ clear intention to limit the Reserve Bank’s powers, not expand them. Judge Jackson agreed with Fourth Corner Credit Union, to a point, but his narrow ruling held that the Federal Reserve Bank’s mandate to provide access to the nation’s payments system did not include financial institutions directly serving the Cannabis Industry because cannabis is still federally illegal.
Taking his guidance from Congress
Furthermore, the judge did not address the question of whether the Federal Reserve Bank has supremacy over the State of Colorado in choosing financial institutions. Neither did the judge invalidate Fourth Corner’s charter, the first of its kind issued by the State of Colorado in over a decade. Rather, the judge ruled that he could not compel the Federal Reserve Bank to grant Fourth Corner Credit Union a master account.
Judge Jackson said that he must take his guidance from Congress, and that the directives issued by FinCEN and the U.S. Department of Justice on Feb. 14, 2014 and before do not provide enough clarity. He called these memos a “nothing burger.” However that same guidance is relied upon by many financial institutions across the country that are working with the industry, and has been adopted by six different government agencies. The federal guidance may be a “nothing burger” to the Judge, but it’s currently guiding a multi-billion dollar industry.
Fortunately, this ruling has not had a chilling effect on the industry, or even on the banks who are supporting the industry. In fact, The Fourth Corner Credit Union has never had more support than it enjoys today.
We have brought this argument to the highest levels of government and will continue to do everything possible to see this dangerous hypocrisy resolved. Many Senators, Members of Congress, and other officials, as well as Judge Jackson, have weighed in on the intrinsic practical dangers of transporting large amounts of cash in order to do business — an unintended consequence of the limitation of banking access to a thriving industry.
We had hoped the court would consider ours one of those exceptional cases where common sense prevails over political dogma. In our view, money and public safety will ultimately triumph, along with common sense.
But not yet.
A safety challenge
It may be that Congress will have fixed this issue before our appeals have been completed. Nobody actually wants this industry to remain unbanked. Most people recognize the safety challenge the government has created for the Cannabis Industry.
It is the Federal Government’s stated intent to allow this social experiment to continue with tightly regulated state controls. That predicates that the experiment be conducted safely.
Fourth Corner Credit Union is applying all our resources to win this battle. We have raised the awareness of the problem to a national level. We have fought for the industry’s right to be treated fairly and professionally. If need be, we will appeal the court’s decision and the industry’s right to have dedicated and specialized financial support all the way to the Supreme Court.