The heads of five federal financial regulatory agencies have replied to a letter from Sen. Michael Bennet (D-CO) that requested clarification on banking services hemp businesses.
The responses, which Bennet’s office provided exclusively to Marijuana Moment, each recognize that hemp was legalized through the 2018 Farm Bill—meaning the rules governing how financial institutions interact with these businesses have changed.
The chair of one body clarified that federal reporting guidelines in place for institutions that work with marijuana businesses no longer apply to hemp companies and said she has “personally discussed the changes during banker outreach meetings both in Washington, D.C. and across the country.”
But the five letters—from the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Farm Credit Administration (FCA) and National Credit Union Administration (NCUA)—varied with regard to what the agencies said they were actively doing, or plan to do, to clear up remaining confusion within the financial sector.
Bennet, a 2020 Democratic presidential candidate, has made much of the hemp industry’s potential, especially as it concerns his home state of Colorado. His initial June inquiry emphasized the role hemp is playing for his constituents and raised concerns about instances in which hemp businesses are still unable to access credit and other banking services despite the crop’s legalization.
“Hemp farmers and processors have made clear that the lack of access to the banking system is a significant hurdle to growing their business,” Bennet told Marijuana Moment. “While I appreciate the response from the banking regulators, it’s clear that more needs to be done to provide banks and credit unions with the assurance and clarity needed to remove this major barrier facing the hemp industry.”
Here’s what the agencies said in response to the senator’s request that they issue guidance clarifying hemp businesses’ ability to access financial services:
Chairman Jerome Powell said that the agency expects banks it supervises to apply “adequate policies, procedures, and processes to address appropriately the risks associated with the particular relationship as required under the Bank Secrecy Act,” and that includes hemp businesses.
“The decision to open, to close, or to decline a particular account is generally made by the financial institution without involvement of the federal regulator,” he wrote.
“The Board does not currently plan to issue guidance specific to this area, because it is our expectation institutions will apply their established policies, procedures and practices to their hemp industry customers, but we will continue to monitor this issue,” Powell said.
FDIC has “received a number of questions regarding the changes made by the 2018 Farm Bill, some of which we are able to answer, but many of which are outside our jurisdiction,” Chair Jelena McWilliams said.
“Nevertheless, we have taken a number of steps to inform financial institutions and our examiners about the changes,” which includes discussing the issue at a meeting of community bankers in March as well as personal conversations McWilliams has had during banker outreach events.
Additionally, FDIC is “in the process of providing training to our examiners on changes to the legal status of hemp and instructing them that the suspicious activity filing requirements prescribed by the Financial Crimes Enforcement Network for cannabis do not apply to hemp.”
McWilliams wrote that financial providers should assess risk on a “case-by-case basis, rather than declining to provide banking services to entire categories of customers.”
“You have my assurance that we will continue to maintain a dialogue with the institutions we supervise to reinforce this policy regarding the provision of services to legal hemp businesses,” she concluded.
Comptroller of the Currency Joseph Otting said that his agency “supports the institutions it supervises in providing banking services to any category of customers operating in compliance with applicable law” and that “[d]ecisions on the provision of financial services are bank business decisions and matters of banker judgement,” which also applies to hemp businesses.
“We expect these general requirements to apply to relationships established and maintained with legal hemp farms and producers,” he wrote.
“The OCC does not currently plan to issue guidance specific to this area,” Otting said, “because we expect OCC-supervised banks to apply their established policies, procedures, and practices to legal hemp farmers and producers. Nevertheless, we will continue to monitor this issue.”
Jeffery Hall, acting CEO of FCA, directed Bennet to a memorandum the agency previously issued in April that “outlines our exception for System institutions to develop underwriting standards for hemp production and processing to take into account applicable federal and state laws, growing conditions, and marketing opportunities.”
The memo stated that “now that there is more clarity and direction regarding the legality of hemp production, each individual System institution should determine when and under what conditions to finance producers or processors of hemp.”
Hall told Bennet that his agency “will continue to closely monitor USDA’s development of hemp program authorized by the 2018 Farm Bill and will provide additional guidance as necessary.”
“I share your concern that hemp farmers and processors may lack access to the financial services system,” NCUA Chairman Rodney Hood wrote. “Full access to the system will better enable these farmers and processors across the country to make investments in their businesses and create jobs.”
“Unfortunately, until the Department of Agriculture completes their regulations and guidelines for this program, the uncertainty for financial institutions will likely remain,” he said, referring to the ongoing rulemaking process at USDA that Secretary Sonny Purdue said would be in place in time for the 2020 planting season.
“The NCUA is working on possible future guidance to financial institutions in this area, and we are consulting with FinCEN and other federal banking agencies,” he said. “Opening, closing, or declining a particular account is a business decision for the credit union.”
“Once we are able to provide more clarity, credit unions will be able to make more informed decisions,” Hood added. “As with any such business decision, credit unions should consider their objective, evaluate the risks, and determine their capacity to manage those risks.”
Bennet isn’t the only lawmaker pushing for clarification post-hemp legalization. Another champion of the crop, Senate Minority Leader Chuck Schumer (D-NY) sent a similar letter seeking guidance on the issue from federal financial regulators on Monday.
Senate Majority Leader Mitch McConnell (R-KY), a chief proponent of hemp legalization, has also put pressure on financial institutions to ensure that hemp businesses have the same access to banking services such as federal crop insurance since the crop was legalized. The senator wrote to federal regulators about the issue in April and this week penned an op-ed detailing his work to ensure that the hemp industry is properly supported.
A top Federal Reserve official was also pressed on what the agency is doing to resolve confusion around hemp during a Senate hearing in June. The official told Sen. Jon Tester (D-MT) that her agency “will try to clarify” that servicing hemp businesses is not illegal.
Outside of the hemp realm, there’s also a growing, bipartisan call to protect banks that service state-legal marijuana businesses. The House Financial Services Committee approved legislation to allow banks to service these businesses in March, and the Senate Banking Committee held a hearing on the issue last month.
Chairman Mike Crapo (R-ID), who earlier this year indicated that his panel wouldn’t hold a hearing on marijuana banking while the substance was federally illegal, has since backed developing a legislative resolution to the issue.
Read Bennet’s initial letter on hemp banking and the agencies’ replies below:
Andrew Yang Peddles Marijuana-Themed Presidential Campaign Merchandise
2020 candidate Andrew Yang announced on Saturday that his campaign for the Democratic Party’s presidential nomination is rolling out a line of marijuana-themed merch.
The limited edition products blend Yang’s love of mathematics with his support for cannabis reform. A t-shirt being offered for $30 simply says, “Math. Money. Marijuana.” And a now-sold-out baseball cap says “Math” on the front and displays a cannabis leaf on back. There’s also a bumper sticker that says, “Legalize Marijuana.”
(Marijuana Moment’s editor provides some content to Forbes via a temporary exclusive publishing license arrangement.)
Buttigieg Pledges To Decriminalize Possession Of All Drugs In First Term As President
South Bend, Indiana Mayor Pete Buttigieg released a comprehensive plan on Friday that calls for “decriminalizing all drug possession” in his first presidential term as a means to combat the opioid epidemic and treat addiction as a public health, rather than criminal justice, issue.
Decriminalization is just one action the 2020 Democratic presidential candidate said he’d pursue in order to reform the country’s mental health care system and bolster substance abuse treatment. His plan also includes proposals to reduce sentences for drug offenses other than possession, increase access to the opioid overdose reversal drug naloxone and make it easier to implement syringe exchange programs.
America’s addiction and mental health care crisis has been building for decades—due to decades of neglect by political leaders in Washington. Today, I’m proposing a new approach that tackles this crisis with the urgency and care it deserves. pic.twitter.com/U8F9DXJPC2
— Pete Buttigieg (@PeteButtigieg) August 23, 2019
Buttigieg’s “Healing and Belonging in America” plan emphasizes the need to divert people suffering from addiction away from prisons and into treatment. He said he’d accomplish that by expanding diversionary programs and evidence-based training “for drug courts, mental health courts, and other alternatives to incarceration for justice-involved persons.”
The goal of decriminalization and diversion is to reduce “the number of people incarcerated due to mental illness or substance use by 75 percent in the first term.”
Our country is in the midst of a mental health and addiction crisis, worsened by decades of stigma and political neglect. I’ll bring a new approach, rooted in commitment and community, to tackle this crisis with the urgency it deserves. https://t.co/spBoh5KH4X
— Pete Buttigieg (@PeteButtigieg) August 23, 2019
Under his plan, sentencing reform for drug offenses other than possession would be applied retroactively and coupled with expungements for past convictions. Buttigieg pointed to research demonstrating that “incarceration for drug offenses has no effect on drug misuse, drug arrests, or overdose deaths” and instead “actually increases the rate of overdose deaths.”
“We cannot incarcerate ourselves out of this public health problem.”
“To ensure that people with a mental illness or substance use disorder can heal, we will decriminalize these conditions,” the proposal states. “When someone is undergoing a crisis or is caught using a drug, they should be treated by a health professional rather than punished in a jail cell.”
“All presidential candidates should join Pete Buttigieg in recognizing that the criminalization of people for their drug use is wrong and simply bad policy,” Maria McFarland Sánchez-Moreno, executive director of the Drug Policy Action, said in a press release. “Possession of drugs for personal use is the single most arrested offense in the United States, eclipsing arrest rates for any other offense. With overdose numbers skyrocketing and entire communities, disproportionately black or brown, suffering from criminalization, it’s time for policymakers to shift gears. Taking an evidence-based, health-centered approach to address this crisis is not only true leadership – it’s common sense.”
The mayor also made harm reduction policies a key component of his strategy. He said take-home naloxone programs would be expanded to all 50 states by 2024 and that harm reduction services would be expanded “to reduce overdose deaths and the spread of infectious diseases related to needle sharing.”
The plan would make naloxone “broadly available in order to reverse overdoses” and remove “legislative and regulatory restrictions on the use of federal funds for syringe service programs.”
Buttigieg said the federal government should provide funding for state and local health departments to purchase the medication, make sure that it’s “available in public spaces and workplaces” similar to first aid kids and encourage “co-prescribing of naloxone with opioids, either by individual physicians or direct dispensing by pharmacists.”
Existing federal law makes it difficult to establish syringe exchange programs, in part because federal funds can’t be used to buy needles. The restrictions “hamper state and local responses, both because they limit resources and because they convey a negative message about the value of these programs, despite overwhelming scientific evidence that they can prevent transmission of HIV and hepatitis.”
In addition to lifting those barriers, the candidate said the Centers for Disease Control and Prevention “would also work with states to remove any criminal liability for those participating in” syringe exchange programs.
“Harm reduction programs are a critical part of any effective response to the opioid and injection drug use crisis. They minimize the negative impact of drug use without encouraging it, while reducing other side effects of drug use. In particular, this means access to syringe service programs for people who inject drugs, that link them to treatment, and provides access to sterile syringes. These programs help prevent transmission of HIV, viral hepatitis, and other infectious diseases associated with needle sharing, and reduce overdoses by deploying medication such as naloxone that help reverse the effects of opioids.”
One harm reduction policy that didn’t make the cut in Buttigieg’s plan is safe injection sites, where people could use illicit drugs under the supervision of medical professionals who could reverse overdoses and recommend treatment options. Sens. Bernie Sanders (I-VT) and Elizabeth Warren (D-MA), who are also running for the Democratic nomination, both proposed legalizing such facilities as part of criminal justice reform plans they released this month.
“Decades of failed mental health and addiction policy, coupled with mass incarceration that criminalized mental illness and drug use, have left us with a mental health and addiction care system so broken that today there are more people with serious mental illness in prisons than in treatment facilities,” Buttigieg said.
The candidate also made ending incarceration for drug possession—as well as legalizing marijuana—central principles of his previously released criminal justice reform plan, which he released last month.
But while the prior plan did not explicitly describe the move as “decriminalizing” drugs, even though advocates commonly use that word to refer to policies that remove the threat of being imprisoned for possession, the new document does use that terminology—signaling a shift in clarity as Buttigieg continues to develop his campaign messaging.
In other instances, he borrowed language from his criminal justice reform plan, specifically as it concerns how criminalizing drug use can increase rates of overdose, for his mental health proposal.
“Despite equal rates of use, Black Americans are nearly four times as likely to be arrested for using marijuana,” the criminal justice plan states. “Research shows that incarceration for drug offenses has no effect on drug misuse, drug arrests, or overdose deaths. In fact, some studies show that incarceration actually increases the rate of overdose deaths.”
Buttigieg mentioned that, as with drug offenses, black people are also more likely to die from overdoses. And that’s due to “the current broken system that criminalizes mental illness and addiction” that was “built during the crack epidemic of the 1980s.”
This story was updated to include comment from the Drug Policy Action.
Photo courtesy of Flickr/Gage Skidmore.
White House Drug Officials Say Legal Marijuana Is Up To States
Two top federal drug officials, including the White House drug czar, recently said that marijuana legalization should be left up to states.
The comments stand out coming from the Office of National Drug Control Policy (ONDCP), which has historically played a central role in defending blanket federal prohibition.
Jim Carroll, the Trump-appointed drug czar who directs the administration’s drug policies, told Fox 59 reporter Kayla Sullivan that he considers legalization a states’ right issue. He added that he’d like to see targeted education campaigns concerning cannabis use during pregnancy and underage usage as well as research into impaired driving.
Got the answer: He believes it should be left up to the state. However, he does want to educate people on the effect marijuana has on young brain development, pregnant women and wants to come up with better guidance & testing for marijuana while driving. https://t.co/eifryNJB1j
— Kayla Sullivan (@KaylaReporting) August 14, 2019
It’s a particularly notable position given that federal law stipulates that the drug czar is required to “take such actions as necessary to oppose any attempt to legalize the use of a substance” listed as Schedule I under the Controlled Substances Act, including marijuana.
Even if Carroll’s remarks arguably don’t directly violate that statute, they are significant in that he doesn’t seem to have taken the opportunity to proactively oppose state legalization efforts when asked by a reporter.
Anne Hazlett, senior advisor at ONDCP, also weighed in on cannabis legalization on Wednesday, telling CentralIllinoisProud.com that marijuana legalization is “a state decision.”
“Marijuana is an ongoing challenge that is being addressed in many of our states,” she said. “This is a state decision, and we would like to see additional research done so that these decisions being made at a state level are being made in a manor that is fully informed.”
Though the comments from Carroll and Hazlett seem to reflect an evolving understanding of the federal government’s role in imposing prohibition on the states, the ONDCP director has previously made clear he’s not enthusiastic about the burgeoning legal market.
During a House Committee on Oversight and Reform hearing in May, Carroll raised concerns about THC potency in marijuana products, saying “the marijuana we have today is nothing like what it was when I was a kid, when I was in high school.”
“Back then the THC, the ingredient in marijuana that makes you high, was in the teens in terms of the percentage,” he said. “Now what we’re seeing is twice that, three times that, in the plant.”
He also said that more research is needed and that the Drug Enforcement Administration as well as the Department of Health and Human Services are “working hard to make sure that we understand the impact of legalization of marijuana on the body.”
Photo courtesy of Philip Steffan.