"Regulation is killing community banks," Treasury Secretary Stephen Mnuchin said at his confirmation hearing in January 2017. If the process is not reversed, he warned, we could "end up in a world where we have four big banks in this country." That would be bad for both jobs and the economy. "I think that we all appreciate the engine of growth is with small and medium-sized businesses," said Mnuchin. "We're losing the ability for small and medium-sized banks to make good loans to small and medium-sized businesses in the community, where they understand those credit risks better than anybody else."
If the goal of the anti-money laundering statutes is to identify and deter criminal activity, strictly enforcing the law could actually backfire in the case of state-legalized marijuana businesses. As noted in a January 9 article in The Daily Beast:
Marijuana businesses have to register and incorporate in states and that puts them on the IRS radar. . . . Sky-high federal taxes on top of state taxes can make it almost impossible to operate a legal business. . . . If the government fails to cut businesses a break, legal marijuana could be sold on the black market to dodge taxes.
On the black market, cash proceeds can be dispersed in a way that avoids banks and makes the money hard either to trace or to tax.
Federal Law Needs to Be Changed
With more than half the states legalizing marijuana for medical purposes, Congress needs to acknowledge the will of the people and remove this natural herb from the Schedule I classification that says it is a deadly dangerous drug with no health benefits. The Tenth Amendment gives the federal government only those powers specifically enumerated in the Constitution, and regulating medical practice is not one of them. Federal courts have held that the federal Controlled Substances Act does not allow the federal government to usurp states' exclusive rights (pursuant to their inherent police powers) to regulate the practice of medicine.
H.R. 1227, the Ending Federal Marijuana Prohibition Act, sponsored by Virginia Republican Thomas Garrett and 15 cosponsors, would remove marijuana from Schedule I and eliminate federal penalties for anyone engaged in marijuana activity in a state where it is legal. Congress just needs to pass it.
In its zeal for eliminating burdensome, costly and ineffective regulations, the Trump administration might also consider lightening the heavy reporting burden that is killing community banks and the local businesses that have traditionally relied on them for affordable credit. On Tuesday, January 16th, a bipartisan coalition of state attorneys general sent a letter to leaders in Congress requesting advancement of legislation such as the Secure and Fair Enforcement (SAFE) Banking Act to "provide a safe harbor" for banks that provide financial products or services to state-legal marijuana businesses. If the government can accept marijuana money in the payment of taxes, banks should be able to accept it to keep track of it and prevent the crimes associated with storing and transporting large sums of cash.
This article was originally published on Truthdig.org.
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