State may cre­ate tax­payer backed bank for pot sales

Ripon Bulletin - - Local / State -

LOS AN­GE­LES (AP) — Cal­i­for­nia of­fi­cials an­nounced Tues­day that they will take a de­tailed look at the pos­si­bil­ity of creat­ing a tax­payer-backed bank to han­dle what could be bil­lions of dol­lars in rev­enue gen­er­ated by the state’s le­gal mar­i­juana in­dus­try.

State Trea­surer John Chi­ang stopped short of en­dors­ing the idea but said his office would work with the state at­tor­ney gen­eral to ex­am­ine how a weed bank might func­tion for Cal­i­for­nia’s emerg­ing pot econ­omy, es­ti­mated to grow to $7 bil­lion.

Le­gal pot sales kicked off in Cal­i­for­nia on Jan. 1. How­ever, many banks don’t want any­thing to do with pot money for fear it could ex­pose them to le­gal trou­ble from the fed­eral govern­ment, which still lists mar­i­juana as il­le­gal.

That means a lot of pot busi­ness is con­ducted in cash, some­times tens of thou­sands of dol­lars, which is risky for cannabis work­ers and the pub­lic. Is a pub­lic bank a so­lu­tion? “Maybe,” said Chi­ang, a Demo­cratic can­di­date for gov­er­nor.

Com­plet­ing the study is ex­pected to take about a year.

How­ever, the idea comes with for­mi­da­ble risks that were out­lined in a state re­port last year, in­clud­ing un­known startup costs, the prob­a­bil­ity of losses for sev­eral years or more that Cal­i­for­nia tax­pay­ers would have to cover and trou­ble ob­tain­ing fed­eral reg­u­la­tory ap­proval.

An­other prob­lem: The Trump ad­min­is­tra­tion has sig­naled a po­ten­tially more ag­gres­sive ap­proach to mar­i­juana pros­e­cu­tion by U.S. pros­e­cu­tors.

That fed­eral ac­tion “casts into tur­moil a newly estab­lished in­dus­try that is creat­ing jobs and tax rev­enues,” Chi­ang said.

The short­age of bank­ing ser­vices means sell­ers and grow­ers must of­ten do with­out com­mon­place con­ve­niences such as writ­ing checks or ob­tain­ing a loan. In Los An­ge­les, of­fi­cials have seen bags of cash as large as $300,000 come through the door to cover pot taxes.

Ac­cord­ing to the state re­port last year, the Bank of North Dakota is the na­tion’s only de­posit-hold­ing, pub­licly owned fi­nan­cial in­sti­tu­tion. It has one office and of­fers lim­ited re­tail bank­ing ser­vices.

Chi­ang com­pared the prob­lem in Cal­i­for­nia to con­di­tions that led to the cre­ation of the North Dakota bank in 1919.

At that time “pri­vate banks failed to pro­mote agri­cul­ture, com­merce and in­dus­try in the ru­ral state, so the pub­lic bank was created,” he said. The fail­ure to meet the needs of the multi­bil­lion-dol­lar cannabis in­dus­try in Cal­i­for­nia “could well turn out to be the cat­a­lyst that vaults pub­lic bank­ing into a re­al­ity here.”


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