The head of the Federal Reserve addressed concerns Tuesday about conflicting state and federal marijuana laws and their effect on the financial industry.
The chairman of the central bank since February 2018, Jerome Powell briefly discussed the issued caused by conflicting pot laws while testifying on Capitol Hill before the Senate Finance Committee.
“My home state of New Jersey is moving towards legalization of recreational marijuana, and I have concerns that these new businesses, as well as the existing medical marijuana businesses in the state, will continue to find themselves shut out of the banking system,” said Sen. Bob Menendez, a Democrat. “And when these businesses are forced to operate exclusively in cash, they create serious public safety risks in our communities. Do you agree that financial institutions need clarity on this issue?”
“I think it would be great to have clarity,” responded Mr. Powell. “Financial institutions and their regulators and supervisors are in a very difficult position here with marijuana being illegal under federal law and legal under a growing number of state laws. It puts financial institutions in a very difficult place. It puts supervisors in a difficult place, too. It would be nice to have clarity on that supervisory relationship.”
Marijuana is prohibited under federal law, though most states have legalized its use for either medicinal or recreational purposes.
New Jersey legalized medical marijuana in 2010, and the Democratic-controlled state legislature is currently pursuing plans to legalize recreational marijuana and implement a system for regulating and taxing retail sales.
Federally-insured financial institutions are reluctant to work with state-legal marijuana industries, however, creating complications in the growing number of states allowing licensed pot shops to conduct commercial sales.
Addressing the conflict eight months earlier, Mr. Powell acknowledged that its impact had caused confusion within the upper echelons of the nation’s financial sector.
“We have state law, many state laws permit the use of marijuana, but federal law doesn’t, so that puts federally chartered banks in a difficult situation,” Mr. Powell told reporters in June 2018. “I think it would be great if that could be clarified.”
“Our mandate doesn’t have anything to do with marijuana, but we’d just like to see it clarified,” Mr. Powell added.
Several bills pending on Capitol Hill would effectively end federal marijuana prohibition. The White House previously said President Trump supports legislation that would allow states to defy marijuana prohibition without prompting intervention from federal authorities.
• Andrew Blake can be reached at ablake@washingtontimes.com.
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