The Federal Reserve would benefit from clarifying rules about banks serving legitimate marijuana-related businesses, the chairman of the Federal Reserve Board said Tuesday.
During questions and answers after testimony before the Senate Banking Committee, Fed Chairman Jerome H. (“Jay”) Powell said he thought “it would be great to have clarity” in federal oversight of financial institutions serving marijuana (or “cannabis”) related businesses.
Powell told Sen. Robert Melendez (D-N.J.) that “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,” he said. “It puts financial institutions in a very difficult place, and the supervisors in a difficult place too.
“It would be nice to have clarity on that supervisory relationship,” he added.
In other comments, for the first time, Powell dodged a question about whether the White House has discussed with him the Fed’s policy over interest rates; he offered no details.
In an exchange with Sen. Brian Schatz (D-Hawaii), Powell for the first time seemed to acknowledge that he has had communications with the White House over monetary policy (in the past, he has consistently answered “no” when asked the question).
After a long pause in response to Schatz’ question whether the White House has ever communicated with him about rates, Powell said that it was probably not appropriate for him to comment on conversations with other government officials.
(In the short video, Federal Reserve Board Chairman Jerome Powell reponds to three questions from three senators on White House contacts with him about interest rate policy, cannabis banking, and the health of the banking system.)
Regarding banking services to legal marijuana businesses, the topic has been a flashpoint both for financial institutions and federal regulators, particularly in states that have begun legalizing marijuana use. Federal law, for the most part, still classifies use (and sales) of cannabis products as illegal, regardless of state laws. As a result, financial institutions have been reluctant to serve the businesses without clarification of where federal law stands.
The situation became more complicated (and unclear) last year, when then-Attorney General Jeff Sessions rescinded an Obama administration policy that directed federal prosecutors not to target marijuana businesses that operate legally under state law.
However, in a hearing earlier this month, the House consumer protection and financial institutions subcommittee heard that employees of financial institutions are forced to deal with piles of cash they receive from legitimate cannabis-related business, which are blocked from using the payments systems of federally regulated and insured financial institutions. Dealing with the cash, the committee heard, is perilous for the financial institutions, their employees, and their communities.
In other comments, Powell told the committee that financial conditions are less supportive of growth in 2019 than they were the previous year. He noted slowing global growth, Brexit and trade uncertainty as factors. The Fed chairman said “muted” inflation pressures “warranted taking a patient approach with regard to future policy changes.”
However, regarding the overall domestic economic outlook, he said “again, I think the outlook is generally favorable.”