Don’t Worry, Rest of the Country, LA is Gonna Solve the Marijuana-Banking Crisis

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No matter how many cities and states come around on marijuana reform and realize that legalizing is the only way to truly diminish the black market, put a dent in our government debts, and solve the opioid epidemic that faces our country, there’s still a gigantic 24-karat gold-plated elephant in the room — banking.

Even in states where legal marijuana markets flourish under state regulation, federally-insured banks — that’s virtually all of them — continue to shut their doors to business accounts that deal with cannabis.

The City of Los Angeles may have a solution thanks to an idea they’re exploring from a nearly century-old bank in North Dakota.

With a myriad of financial dilemmas facing the nation’s second-largest city, Los Angeles City Council President Herb Wesson wants to open a bank to solve them all. The city has money in more than 800 different accounts with Wells Fargo, the banking giant still reeling from a scandal in which employees created accounts for customers without authorization to meet aggressive sales goals — customers were then hit with unauthorized charges and fees. Last fall, the city settled a massive suit with Wells Fargo for $185 million after news broke of the bank’s predatory sales practices.

In July, Wesson motioned for the city council to establish the first city-owned bank in the United States, and the Ad Hoc on Comprehensive Job Creation Plan Committee began deliberating the idea on Wednesday.

Wesson said the bank would “provide the best financial solution to reducing the cost of the creation and rehabilitation of affordable and workforce housing in the City of Los Angeles, while at the same time providing low cost financial services for city residents and local governments within the Los Angeles region and much needed financial services for the cannabis industry.”

Lt. Governor Gavin Newsom suggested a similar state-owned bank in May that he believed could “build our infrastructure, construct new health care facilities, provide student loans, and build 3.5 million new housing units by 2025.”

The concept originated in 1919 with the Bank of North Dakota (BND) when locals were fed up with their bank’s financial strategy being overly influenced by outside interests like railroad and agricultural companies from other states. The single-location BND is not a traditional bank in that it doesn’t offer customers debit or credit cards; there’s no ATM access. The state-owned-run bank is able to offer loans at low interest rates.

Skeptics argue the proposition would be too expensive for a city already in financial trouble, potentially costing as much as $250 million to cover the operating costs of a bank that could service assets of up to $2 billion.

“We cannot bury our heads in the sand on the issue of recreational and medical cannabis legalization. Instead, we must strive to reasonably regulate the emerging industry while creating opportunities for Angelenos,” Wesson commented on cannabis legalization in July.

Legalized marijuana could bring more than $100 million in new tax revenue for Los Angeles.

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Used to write about music for XXL, Elevator, Complex, Genius, and a few other outlets. Follow @LongLiveTheDuke on Twitter if you'd like to read way fewer words by me.

3 Comments

  1. There would be no problem at all if cannabis were, as it had been for millennia, unregulated.

    Well it is easy to understand the allure to legislators of the money potential for regulated cannabis, attempts to keep the price at/near/above the black market price keeps the black/gray market going–and the problems that the drug cartels, and now dozens of criminal organizations from around the world create by growing (and protecting) their illegal fields.

    Portugal did it right, and it is simply incredible that given a proven effective way to eliminate the problems created by making drugs illegal, no country has followed suite, and the USA is still using the issue as an excuse to bully other countries and ignore national borders.

    So long as the prices remain high, the illegal market will not go away, and it’s problems will remain.

    There’s no good reason for prices to be over a few dollars an ounce if there is no regulation or illegality.

    Why every government seeks to limit and tax anything cheap that makes peoples lives easier, is their greed for money.

    Remember the “tax free” IRA’s created in the 1980’s? Shortly after the Congress smelled how much money was going into the program, they decided to tax it.

    If the money went to things people need, well, that would be unusual. It gets spent on projects designed to funnel money in large bundles to large corporations which pay small amounts to legislative war chests.

    We need to fire our public servants for forgetting who they work for.

    • Lawrence Goodwin on

      Good points, Chuck. The Bureau of Alcohol was created after the repeal of Prohibition, specifically to regulate the licensing process in all states for alcohol production, distribution and sales. The same agency still exists and is a balancing force, albeit with additional jurisdiction over national tobacco, firearms and explosives markets (aka BATFE). In general, because of proper government regulation through the BATFE, the products in all of those markets are arguably the safest they can be for public consumption. Therefore, that seems to be the only “proper” federal agency to regulate the growth of cannabis plants, or the profitable distribution and sales of their obviously miraculous raw materials.

      No matter how we, the politicians’ bosses, decide to re-legalize cannabis, first we have to end their damned war on these plants. The forces of anti-“marihuana” tyranny are prolonging the hunt and eradication of seedless, female cannabis flowers in many states and counties–as they have for exactly 80 years now–with no regard for the scandalous waste of taxpayer dollars that results.

  2. $250 Million to operate a bank? What exactly are they smoking? Check the operating costs of the top ten Credit Unions in LA, and come back with a number from the Real World. Or, ask BND to punch out a branch in LA.

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