2024’s Turn on the Merry-go-round of Marijuana Banking

By David Baumann, Editor, Washington CU Daily

Pardon me if you’ve heard this before: Democratic senators say that marijuana banking legislation remains a high priority for them.

That’s what they’ve been saying for several years, and so far, nothing has happened.

Once again, on April 9, Senate Majority Leader Charles Schumer, D-N.Y., sent a letter to colleagues outlining the chamber’s priorities for the coming months. Marijuana banking legislation was included in that laundry list.

However, as in the past, Schumer delivered a warning.

Schumer said bipartisanship and compromise are the only ways to get things done with a divided government. “Democrats have an ambitious agenda to help the American people, and if our Senate Republican colleagues are sincere about passing bipartisan legislation and willing to reject the extreme MAGA demands, we are ready to work with them to find compromise and get as much done as we can,” he wrote, in his “Dear Colleague” letter.

Now, Schumer is discussing adding marijuana banking and stablecoin legislation to the must-pass Federal Aviation Administration reauthorization legislation. He’s likely to face opposition to that plan.

Since marijuana is illegal on the federal level, credit unions and banks that conduct business with cannabis-related businesses run the risk of being sanctioned by their regulators. And that is the case even in states where marijuana is legal. That has made many credit unions and banks skittish about conducting business with marijuana businesses. As a result, even in states where cannabis is legal, marijuana remains a cash-only transaction. That, supporters of the legislation argue, has made those businesses sitting ducks for criminals.

The solution, supporters contend, is for Congress to pass legislation making it clearly legal for credit unions and banks to conduct business with marijuana-related firms. That legislation has been kicking around Capitol Hill for many years. It has passed the House in free-standing legislation, as well as a rider on otherwise must-pass bills, such as the annual defense authorization measure. However, the Senate has never considered the bill.

America’s Credit Unions, as well as banking trade groups, have supported the bill for years.

The Senate Banking Committee has approved S. 2860 in the current Congress, clarifying that credit unions and banks can serve marijuana-related businesses.

In testimony before the House Appropriations Committee’s Financial Services Appropriation Subcommittee in March, Yellen endorsed the bill.

“I think legislation may be necessary to raise the comfort level,” she said. “We potentially would welcome legislation in this area that would clarify for banks what their responsibilities are.”

One possible hang-up emerged during the Senate Banking Committee debate on S. 2860, and it had nothing to do with marijuana. A provision in the bill would prohibit a federal banking regulator from asking that a financial institution terminate a specific customer account or a group of accounts.

Sounds innocuous?

It’s not.

Republicans have pushed for such a plan in the past. They cited “Operation Choke Point,” an Obama Administration plan that GOP members contend allowed credit unions and banks to decide not to serve specific industries, such as gun manufacturers.

The provision had been added to the marijuana banking bill in an attempt to attract Republican support.

However, progressives, most notably Senate Banking Committee member Sen. Jack Reed, R-R.I., have singled out the provision, contending that it would make it harder for federal banking regulators to raise a red flag about a specific customer who might pose a risk to a credit union or bank.

But at least one Republican senator said that provision does not go far enough. During committee consideration of the bill, Banking Committee member Sen. Mike Crapo, R-Idaho, said the provision contained holes that financial institutions “could drive any kind of truck through.”

Even if the bill passes the Senate, it could run into trouble in the Republican-controlled House, where passing anything has become a major political problem.

House Democrats have long supported the legislation, and it has passed the House several times when the Democrats were in control. Now, of course, Republicans are in control of the House.

House Financial Services Committee Chairman Rep. Patrick McHenry, R-N.C., has said marijuana banking is not a priority for him. However, House Republican Whip Rep. Tom Emmer, R-Minn., recently told the American Bankers Association last month that he favors the bill.

In a recent televised interview with Bloomberg News, Financial Services Committee ranking Democrat Rep. Maxine Waters, D-Calif. said that Senate Minority Leader Sen. Mitch McConnell, R-Ky., may be part of the problem.

But Waters made it clear that marijuana banking legislation must pass.

“Now is the time,” she said. That remains to be seen.