Posts tagged Banking

Chase, Citigroup, Morgan Stanley, Wells Fargo, Goldman Sachs, Bank of America: Wall Street, Donate Your Bonuses!

“Absurd on every single level”: How the feds may be crippling the legal pot industry

Because the federal government still classifies pot as a dangerous drug, corner cannabis stores and cultivators cannot secure access to traditional banking services, and do a shocking amount of their business in cash. Banks are reluctant to work with pot-related businesses, out of fear that the government will prosecute them for laundering illegally obtained money. This heightens the potential for crime at pot shops, imposes heavy costs on businesses seeking legitimacy, and could cripple the industry just as it gets started.

“I run a state-approved business, and I don’t have the ability to walk into a bank and open a bank account,” business owner Alex Cooley told Salon. Cooley’s Solstice Grown is the first legally permitted cannabis production facility in Washington state, and he sells to multiple distributors. Cooley’s story is familiar in the industry, where everyone is a phone call away from losing access to banks. Solstice had an account with Boeing Employees Credit Union for several years, under what Cooley described as a “don’t ask, don’t tell” arrangement. But when the credit union read about Cooley’s work to become a permitted cultivator, and his advocacy for the state initiative that legalized cannabis for adult use, it canceled his account. “We operated, by their own description, ‘an exemplary account,’” Cooley said. “It’s frustrating, because they were saying to us, ‘we found out about you because you’re trying to be legitimate. So now we’re going to close your bank account.’”

Last week, Colorado became the first place in the world to legally sell regulated and taxed marijuana for adult recreational use. Despite the winter weather, long lines and heavy demand led some stores to jack up their prices or even sell out of product. The early success has elevated expectations for a new “green” economy, with a projected market value of $10.2 billion by 2018, according to Arcview Market Research.

But one crucial detail threatens to hold the industry back.

Because the federal government still classifies pot as a dangerous drug, corner cannabis stores and cultivators cannot secure access to traditional banking services, and do a shocking amount of their business in cash. Banks are reluctant to work with pot-related businesses, out of fear that the government will prosecute them for laundering illegally obtained money. This heightens the potential for crime at pot shops, imposes heavy costs on businesses seeking legitimacy, and could cripple the industry just as it gets started.

“I run a state-approved business, and I don’t have the ability to walk into a bank and open a bank account,” business owner Alex Cooley told Salon. Cooley’s Solstice Grown is the first legally permitted cannabis production facility in Washington state, and he sells to multiple distributors. Cooley’s story is familiar in the industry, where everyone is a phone call away from losing access to banks. Solstice had an account with Boeing Employees Credit Union for several years, under what Cooley described as a “don’t ask, don’t tell” arrangement. But when the credit union read about Cooley’s work to become a permitted cultivator, and his advocacy for the state initiative that legalized cannabis for adult use, it canceled his account. “We operated, by their own description, ‘an exemplary account,’” Cooley said. “It’s frustrating, because they were saying to us, ‘we found out about you because you’re trying to be legitimate. So now we’re going to close your bank account.’”

Almost every aspect of a business is affected by a lack of stable access to financial services. Customers cannot pay with a credit or debit card. Shop owners have nowhere to store paper money except in safes or under their mattresses. They cannot pay employees through normal payroll services. They cannot access a line of credit to expand their business. Running a marijuana shop often resembles a bygone era of trudging around dollar bills to pay off creditors. “One of the most memorable stories was about the owner of a medical marijuana store, who walked into a state revenue office to pay his taxes with $40,000 in cash in a big sack,” said Rep. Denny Heck, D-Wash., who is working in Congress on a fix for the banking issue.

Financial institutions don’t want to run afoul of the Anti-Money Laundering Act, which can charge fines of up to $500,000 per transaction for working with companies who sell illegal products. Though Colorado and Washington have been cleared for adult recreational use sales, and 21 states (plus the District of Columbia) have legalized pot for medicinal use, marijuana remains illegal under the federal Controlled Substances Act. Even a state-owned bank, which one Washington lawmaker has proposed, would have to abide by federal banking laws. The discrepancy between state and federal law puts financial institutions at risk of money laundering prosecution, and they want precise assurances before assuming that risk. “They want the safe harbor to be so abundantly clear,” said Rep. Heck. “But at the end of the day, we want banks and credit unions to be excellent risk managers.”

The irony here is rich. A year ago, British-based bank HSBC was fined $1.9 billion for actual money laundering for Mexican drug cartels, suspected of killing thousands of innocent civilians. HSBC had no problem doing very profitable business with the illegal drug trade, and they basically got away with it, with no criminal prosecution and a paltry fine. But in Washington and Colorado, you have legal businesses operating within state law, and no bank will touch them. “I guess they don’t think we’re big enough dollar-wise for them to risk it,” said Alex Cooley of Solstice. “But it’s crazy, in Washington, Bank of America is the state bank. They’ll take our tax revenue from the state but they won’t take our money.”

Bank reluctance also involves paperwork. Under current law, banks must submit suspicious activity reports (or SARs) to regulators every time they encounter a transaction that may involve money laundering. Even after eliminating the possibility of prosecution over legal marijuana shops, banks may still have to file SARs. “Banks want to get rid of reports anyway,” said Rep. Heck.

All-cash operations expose pot shops as a robbery target, as well as the vendors they pay in dollars, and even the customers, who must carry cash to purchase the product. While statistics on crime around marijuana businesses are mixed, working in cash obviously raises the potential. “I’m less safe and my staff is less safe by people thinking and believing that we may have $30,000 in cash on us,” said Alex Cooley. “It’s not fair to put me in harm’s way because banks are afraid of working with us.”

Moreover, it makes it impossible for legal businesses to comply with regulations and standards, inviting tax evasion and phony accounting the way any untraceable cash-only business would. Even those with “wink and a nod” bank accounts find business more cumbersome. For companies like Alex Cooley’s, who sell wholesale to marijuana shops that often pay them in large sums of cash, the processing costs can add up. “Cash isn’t king anymore. It can take us multiple labor-hours to process a payment,” Cooley said. “With a check, we take a picture with our phone and file it. We want to have full compliance with the law, but it’s difficult without a paper trail or a digital transaction.”

The Justice Department released a memo last August, reassuring businesses that they would be able to sell marijuana legally under certain strict guidelines. But the memo only referred to criminal prosecutions on possession and use, leaving out money laundering violations, and not giving banks the same peace of mind given to retail marijuana stores. Deputy Attorney General James Cole told the Senate in September that the department was working on the issue, but granting a safe harbor involves multiple banking regulators as well as the Treasury Department’s Financial Crimes Enforcement Network (or FinCEN). “It’s no real problem for Justice to say they won’t prosecute, but Treasury doesn’t operate under a discretionary basis,” said Mark Kleiman, a public policy professor at UCLA who consulted with Washington state in designing its regulatory framework for adult use marijuana. “Treasury has to decide this is legal. They’ve got to figure some way that it’s actually OK.”

FinCEN’s director, Jennifer Calvery, told Reuters banking for the legitimate marijuana industry would be addressed in a Dec. 12 meeting of the obscure Bank Secrecy Act Advisory Group, composed of regulators, law enforcement and industry members. That group can recommend policy changes to Treasury, and give guidance to the financial industry. The same day, Dec. 12, Rep. Heck had the opportunity to question Treasury Secretary Jack Lew at a House Financial Services Committee hearing, and he brought up the issue. Secretary Lew deferred to the BSAAG, saying, “Obviously I recognize the serious challenges to this … I look forward to seeing the work that comes out of the meetings that you’re describing, and we’ll evaluate them when they’re presented to me.” Heck was told that Lew’s testimony was placed into a PowerPoint presentation before the BSAAG hours after the exchange. “I was encouraged by the knowing look in Secretary Lew’s eye,” said Rep. Heck. “He wasn’t hearing this for the first time.”

However, a month later, nothing has come out of the meeting. The BSAAG meets in secret, and as an advisory group, it is not subject to Freedom of Information Act guidelines. FinCEN did not respond to Salon for comment. Rep. Heck remains hopeful that regulators and law enforcement will soon issue guidance relieving banks from fear of prosecution for working with legitimate businesses, and relaxing the requirement on submitting suspicious activity reports for every transaction. The chief legal counsel to Colorado Gov. John Hickenlooper said that he expected such guidance to banks by the first quarter of this year.

But even this would only represent a “yellow light” to banks to work with the industry, and it’s unclear whether that would placate financial institutions. Any guidance would still be discretionary, and a zealous prosecutor or a change in administration could reverse that at any time. “It would be completely ridiculous for JPMorgan Chase to accept business from a marijuana shop,” said UCLA professor Mark Kleiman. “Why would they expose themselves to prosecution from President Huckabee’s attorney general?”

Rep. Heck and his colleague Ed Pelmutter, D-Colo., have introduced bipartisan legislation that would give legal clearance for transactions with marijuana-related businesses without threat of prosecution. But as marijuana business owner Alex Cooley rightly noted, “bills don’t really make it through Congress anymore.” An even simpler fix would involve the attorney general using his authority under the U.S. Code to remove marijuana as a Schedule 1 drug, eliminating its applicability to the Controlled Substances Act. This is what the financial industry has said would satisfy them. But Eric Holder hasn’t moved on rescheduling in his first five years in office.

Despite the legal framework in place in the states, and the obvious interest many banks have in serving legitimate customers, regulators and law enforcement have not aligned to fix this problem. As a result, every medical or adult use marijuana business in America lives with the uncertainty of having their banking access cut off.

“It’s completely absurd on every single level,” said Alex Cooley of Solstice Grown. “We don’t want to launder money. We pay taxes on everything we do. We’re just not being treated fairly.”

Thanks for giving credence to the right-wing rant Washington is The Problem Washington.

JP MORGAN CHASE: DON'T EVICT 78-YEAR OLD DISABLED GRANDMA SUSIE

In 1991, my mother Susie Johnson, now 78 years old, moved into her house in Orange, NJ. She instantly fell in love with the home and the neighborhood, frequently hosting barbeques and spending her days sitting on her front porch talking to neighbors.

In 1996, after she had been renting the home for five years, a representative of Homeside Lending knocked on her door, and asked her if she would be interested in purchasing the house. All her life, my mother had talked about wanting to accomplish two goals- going to college and owning her own home. She had already achieved the first goal, and now here was her opportunity to fulfill the second. She took out a mortgage with Homeside Lending and bought the house for $65,000, claiming her own piece of the “American Dream.”

My mother took pride in her home, faithfully paying her mortgage on time every month, and investing her own money to fix it up. Then suddenly, in February 2003, she received a notice from Washington Mutual Bank, returning her payment for that month and notifying her that she was in default, claiming she had not paid since October 2002. This was the first time she had received anything from Washington Mutual, who had apparently taken over her mortgage from Homeside and was now the servicer of her loan. At their instruction, my mother sent in copies of the missing payment receipts to Washington Mutual, attempting to reconcile the situation. Despite this, Washington Mutual filed for foreclosure claiming she was delinquent on her loan, even though until that time she had never missed a payment.

Her attempts to fight them in court failed, as the judge disregarded most of the evidence and granted them the right to evict anyway. In the meantime, John Stolarenko, the former president of Eastwood Mortgage Bankers who signed my mothers original loan documents, was convicted of mortgage fraud and served 10 months in prison. JP Morgan Chase took over the loan, and picked up where Washington Mutual left off, pushing forward with their attempts to evict my mother and take her home.

Over the years, I have watched my mother’s health deteriorate as the stress of the foreclosure has taken it’s toll. She has lost weight, and now suffers from anxiety and depression. Instead of sitting on the porch or hosting barbeques, she has become reclusive, afraid of answering the door for fear that it will be the sheriffs there to put her out on the street. We’ve watched as our community has been devastated by the housing crisis, while banks like JP Morgan Chase cash in on their crimes.

On January 1, my mother will be 79 years old. It’s time for JP Morgan Chase to do the right thing and give her home back to her for good so she can reclaim her dignity and go back to living her life in peace.

Attorney General Eric Holder: Please investigate the Securities Industry and Financial Markets Association (SIFMA) and major banks' plan to redline the City or Richmond and other communities considering local principal reduction programs.

We knew the big banks would play dirty in their fight against Richmond’s plan to stop the wave of foreclosures decimating our city’s communities. But we didn’t know they would stoop this low.

The banks want to bully Richmond, CA out of our plan to acquire underwater homes by threatening to make it more expensive for people to borrow money to buy homes if our plan passes.

Please sign the petition to tell the bullies they won’t win.

Bank of America: Stop trying to cut tax exemptions for credit unions.

We can’t afford a future without credit unions. If we show the banks just how much this desperate gamble will backfire, the threat of bad publicity and another banking scandal will cause the banks to rethink their pricy lobbying push. Large-scale protests have forced banks to change their tune before, and once word gets out about the banks’ incredible greed, the backlash should send them packing.

Anytime that regulation is mentioned, bankers like to cry out about free-market principles. But banks use an army of lobbyists to shape legislation as they see fit. This time, they’ve gone too far in trying to take out the competition. If we all step up today, we can stop this in its tracks, and save consumer-friendly credit unions from extinction.

As the Garcias face a possible eviction date of tomorrow, Wells Fargo still hasn’t come to the table—even though they were happy to trick the Garcias into a predatory loan modification in 2010.
Call the offices of
CEO John Stumpf at  415-396-7018and
President Michael Heid at  515-213-6117
…tell them:

Hi, my name is _______ and I’m calling to demand Wells Fargo halt the eviction of the Garcia family at 4409 Van Buren Ave NE in Columbia Heights, Minnesota. The Garcias paid their mortgage in good faith for nine years, but Wells Fargo tricked them into a predatory loan modification they never asked for and is now pushing to evict. Evicting the Garcias will destroy the life they have worked hard to build for themselves and their daughter. Wells Fargo must end its pattern of systemic discrimination against Latino families and right this wrong against the Garcias. The Garcia family is not planning on leaving their home until Wells Fargo comes to the table with a fair offer. I demand that Wells Fargo negotiate with the Garcias to all ow them to stay.

As the Garcias face a possible eviction date of tomorrow, Wells Fargo still hasn’t come to the table—even though they were happy to trick the Garcias into a predatory loan modification in 2010.

Call the offices of

  • CEO John Stumpf at 415-396-7018
    and
  • President Michael Heid at 515-213-6117

…tell them:

Hi, my name is _______ and I’m calling to demand Wells Fargo halt the eviction of the Garcia family at 4409 Van Buren Ave NE in Columbia Heights, Minnesota. The Garcias paid their mortgage in good faith for nine years, but Wells Fargo tricked them into a predatory loan modification they never asked for and is now pushing to evict. Evicting the Garcias will destroy the life they have worked hard to build for themselves and their daughter. Wells Fargo must end its pattern of systemic discrimination against Latino families and right this wrong against the Garcias. The Garcia family is not planning on leaving their home until Wells Fargo comes to the table with a fair offer. I demand that Wells Fargo negotiate with the Garcias to all ow them to stay.
Giant bank holding companies now own airports, toll roads, and ports; control power plants; and store and hoard vast quantities of commodities of all sorts. They are systematically buying up or gaining control of the essential lifelines of the economy. How have they pulled this off, and where have they gotten the money?
To stem the foreclosure crisis - costing $242 million in 2012 alone - and help some of the 46% of city homeowners currently underwater, Richmond, CA is taking historic action by offering to buy distressed loans from the Wall Street bankers who own them. Support this bold action of Local Principal Reduction as a first step for stopping the crisis around the country.

Obama is rumored to be considering nominating former White House Economic Adviser Larry Summers to replace Ben Bernanke as chairman of the Federal Reserve.

Uygur noted that Summers had pushed to deregulate the banking industry during his time in the Clinton administration, where he served as Deputy Secretary of the Treasury and later Secretary of the Treasury. Summers supported the successful repeal of a key provision of the 1933 Glass-Steagall Act, removing barriers between commercial banks, investment banks, insurance companies and securities firms.

Though the deregulation of Wall Street lead to an financial collapse in 2008, Summers has said he wouldn’t do much different in retrospect.


(via BofA Gave Bonuses to Foreclose on Clients, Lawsuit Claims - Bloomberg)

…the second-biggest U.S. lender, rewarded staff with cash bonuses and gift cards for meeting quotas tied to sending distressed homeowners into foreclosure, former employees said in court documents.
Mortgage workers falsified records and were told to delay U.S. loan-assistance applications by requesting paperwork that the Charlotte, North Carolina-based bank had already received, according to statements from ex-employees filed last week in federal court in Boston. The lender improperly disqualified applicants to the Home Affordable Modification Program, or HAMP, according to a May 23 statement from Simone Gordon, a loss-mitigation specialist who left the company in 2012.

(via BofA Gave Bonuses to Foreclose on Clients, Lawsuit Claims - Bloomberg)

…the second-biggest U.S. lender, rewarded staff with cash bonuses and gift cards for meeting quotas tied to sending distressed homeowners into foreclosure, former employees said in court documents.

Mortgage workers falsified records and were told to delay U.S. loan-assistance applications by requesting paperwork that the Charlotte, North Carolina-based bank had already received, according to statements from ex-employees filed last week in federal court in Boston. The lender improperly disqualified applicants to the Home Affordable Modification Program, or HAMP, according to a May 23 statement from Simone Gordon, a loss-mitigation specialist who left the company in 2012.