XPost: alt.politics.economics, sac.politics, alt.fan.rush-limbaugh   
   XPost: alt.drugs.pot   
   From: dopers@barackobama.com   
      
   Banking regulators just said no to a financial institution that   
   aims to be the first to serve the expanding marijuana industry   
   in Colorado.   
      
   The Fourth Corner Credit Union in Denver applied in November to   
   the Federal Reserve for a “master account,” which would allow it   
   to interact with other financial institutions and open its doors   
   to some of the hundreds of state-licensed marijuana businesses   
   in Colorado.   
      
   Although recreational marijuana has been legalized in Colorado,   
   it is still illegal on the federal level, discouraging most   
   traditional banks from working with pot businesses.   
      
   The Fed’s branch in Kansas City, which has been reviewing the   
   application, privately informed the Fourth Corner Credit Union   
   earlier in July that it had not been approved for a master   
   account, the credit union said on Thursday.   
      
   The credit union, which has the backing of Colorado’s governor,   
   fired back on Thursday night by filing a lawsuit in federal   
   court in Denver against the Fed, demanding “equal access” to the   
   financial system.   
      
   Mark Mason, who has been leading the credit union’s creation,   
   said that after months of answering the Federal Reserve’s   
   queries, he was unsurprised by the answer he received.   
      
   “I felt all along like they were trying to figure out a way to   
   deny our application,” said Mr. Mason, who also runs a law firm   
   in South Carolina. Now, he said, “a federal judge who is only   
   concerned in applying the law can make the decision.”   
      
   Nearly all banks have refused to open accounts for the hundreds   
   of marijuana businesses in Colorado and other states with   
   similar laws, leaving the businesses to operate in an all-cash   
   economy with the significant dangers that can bring. Many small-   
   business owners in the state have had to improvise with safes,   
   armored cars and other alternatives to banking.   
      
   Colorado’s state government has said that the lack of access to   
   banks is a public safety issue, as well as a deterrent in the   
   state’s effort to collect taxes. Mr. Mason won the state’s   
   backing for his venture after he brought on money-laundering   
   experts to build its policies. The credit union was granted a   
   state license last year, on the condition that it still had to   
   receive approval from the Fed before opening for business.   
      
   Andrew Freedman, Colorado’s director of marijuana coordination,   
   said he was disappointed by the Fed’s decision.   
      
   “We thought it was a good solution to the problem,” he said.   
   “Here was a place willing to take on the risk of banking this   
   underbanked group — and that could do rigorous compliance.”   
      
   The credit union’s lawsuit could push the courts to resolve the   
   continuing conflict between the federal laws against marijuana   
   and the dozens of states that have legalized it in some form.   
      
   Peter Conti-Brown, a professor of legal studies at the   
   University of Pennsylvania’s Wharton School, said there was   
   little precedent to guide the courts in such a case. Still, he   
   said, it will be an uphill battle for the credit union to prove   
   that the Fed does not have the power to turn down the   
   institution.   
      
   “Most of the cards are in the Fed’s hand,” he said.   
      
   This year, the president of the Kansas City Fed, Esther George,   
   wrote that the Fed had “discretion” in deciding which master   
   accounts to open. She also said the Fed would consider the   
   decision made by the National Credit Union Administration on   
   whether to grant the Denver credit union deposit insurance,   
   similar to the $250,000 coverage that the Federal Deposit   
   Insurance Corporation provides for standard bank accounts.   
      
   Shortly before the Fed made its decision this month, the credit   
   union administration, an independent federal agency, privately   
   informed the Fourth Corner Credit Union that it was not eligible   
   for insurance, partly because it had not proved how it would   
   “mitigate the risk associated with serving a single industry   
   that does not have an established track record of success and   
   remains illegal at the federal level.”   
      
   Mr. Mason filed a separate suit against the credit union   
   administration on Thursday night, claiming that the agency had   
   violated his credit union’s constitutional right to due process.   
      
   But his bigger issue is with the Fed. He says that even without   
   insurance from the credit union administration, he could secure   
   private deposit insurance and open if he could obtain a master   
   account with the Fed. Such accounts make it possible to take   
   credit and debit card payments and move money electronically.   
      
   In the lawsuit, Mr. Mason contends that the Fed’s own rules give   
   it little discretion in deciding who should and should not be   
   able to have a master account, and do not allow it to rely on   
   other agencies, like the credit union administration.   
      
   “We weren’t treated fairly,” he said. “We weren’t treated   
   according to procedure.”   
      
   For now, Mr. Mason continues to run his five-person law firm in   
   South Carolina and pay many of the costs for the credit union   
   out of his own pocket, backed by a board that includes three   
   marijuana entrepreneurs in Colorado. The credit union has a   
   handful of executives and a building in Denver waiting to open   
   for business.   
      
   Under the federal guidelines issued by a division of the   
   Treasury Department last year, financial institutions are   
   pressed to file “suspicious activity reports” when a new pot   
   business opens or closes an account. But that guidance left   
   unclear whether it was legal to deal with such businesses.   
      
   Colorado politicians have sponsored bills in the House and   
   Senate that aim to dispel the confusion.   
      
   In the meantime, Mr. Conti-Brown said that Mr. Mason’s credit   
   union — and the businesses that want to use it — may be stuck   
   using cash.   
      
   “They are going to face the longest of odds until there is a   
   clear and permanent change to federal policy,” he said.   
      
   http://www.nytimes.com/2015/07/31/business/dealbook/federal-   
   reserve-denies-credit-union-for-cannabis.html?_r=0   
      
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