by Matt Stannard
I will give a public presentation to California Treasurer John Chiang and his Cannabis Banking Working Group on August 10 in Los Angeles. The meeting will be held at the Sheraton Gateway Hotel on Century Blvd. It will start at 9:30 a.m. and is expected to go until 1:30 or 2:00 p.m. The meeting is open to the public and is expected to be webcast live. My colleague Marc Armstrong, president of Commonomics USA, will join me at the table for questions and answers following my presentation to the Working Group.
Given the scope of the question–whether the State of California should open a public bank–and the fact that the State Treasurer has called this meeting solely to discuss public banking, we could easily call this the “biggest” official meeting about public banking, ever. Its scope is unprecedented and the event itself is a “surprise,” originally not part of the series of Working Group meetings and added only after the Working Group heard several public comments on public banking at its previous meetings.
John Chiang’s staff informed us that other presenters for the August 10 meeting include Gwen Hallsmith of Global Community Solutions, Auburn University Professor James Barth, Colorado Bankers Association president Don Childers, and former Massachusetts Bank Commissioner David Cotney. We expect that some of these participants will be arguing against public banking, but the format of the hearing is not adversarial.
MRB banking has been on the radar of the public banking movement before, but many of our earlier assumptions were naïve concerning how cleanly a state-only cannabis economy could break free of federal banking oversight. After extensively researching that oversight, the team at Commonomics USA determined that, while not a magic bullet (there are no magic bullets on this question), a public bank would be a strong candidate for containment and management of legal risk, and serve as a conduit of states’ independent approaches to cannabis policy and the multibillion dollar windfalls of recreational legalization.
The heavy-handed rhetoric of the current United States Department of Justice and its Attorney General threatening pushback against California and other states is a significant departure from the imperfect but significant attempts by the previous administration to work with states. The Cole Memo, currently under review, and the FinCEN guidelines both provided some degree of predictability concerning the federal government’s Controlled Substance Act enforcement priorities. Licensing a public bank with robust monitoring and compliance resources, as the “first touch” for state MRB revenue, would be a responsible, good-faith gesture amidst current federal unpredictability.
We believe the State of California, or a charter city in California, should create a public bank that will provide accounts to marijuana-related businesses (MRBs) with top-level monitoring security, and legal compliance. Such a bank can also provide accessible services to California’s unbanked and underbanked residents, and provide credit for public projects and services to lower the cost of public financing and meet the structural and service needs of Californians, reducing the state’s reliance on both Wall Street and the federal government. California should immediately create and submit a business plan to the Federal Reserve of San Francisco in application for a Master Account Number.
Given the Federal Reserve Bank of Kansas City’s recent reluctance to provide an account number to a small, private credit union in Colorado that intended to serve MRBs (a case we at Commonomics USA have been following very closely), there will be legal challenges and some resistance to overcome to make this happen. Our position is to embrace that challenge and fight for a public bank, whether that means convincing the Federal Reserve, convincing the courts, or changing the laws.
As Marc said to me recently, “a central argument of ours is that, when it comes to the cannabis market, the people have spoken and it’s up to elected officials not to do what the DOJ is doing, but to make the market as transparent and accountable as possible, with individuals and legal organizations acting responsibly and above-board. Enough with the intrigue, innuendo, threats and dangers to public safety. Time for an open market that has readily enforceable standards and with deposit accounts for every licensed MRB.” And–if the people of California want it–a public bank to utilize MRB revenue for public goods.
We hope for a strong public presence in support of public banking at the August 10 hearing, both inside and outside of the venue and in the coming days will make information available on local organizing efforts.
Matt Stannard is Policy Director at Commonomics USA.