Hearing of the Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee - Opening Statement of Rep. Luetkemeyer, Hearing on Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses

Hearing

Thank you Mr. Chairman. Before I begin, I'd like to congratulate Mr. Meeks on his role as our Chairman of this subcommittee. We have served together on this Committee for nearly a decade and while we may not always agree on everything, I'm confident we will be able to find common ground in many instances. I look forward to working with you, sir.

Today, we're discussing an issue that, we can all agree, must be addressed. As changing state laws spur the formation of thousands of cannabis-related businesses across the country, I've heard from many banks and credit unions who are facing the decision of whether they can or can not get involved with these businesses.
For the last six years, I have fought alongside my colleagues on this committee to ensure all legal businesses in the United States have access to financial services. Operation Choke Point, which sought to deprive legal businesses of the services they need to survive, has seen bipartisan opposition over the years. Today, however, we are having a very different conversation. Today, we are discussing the merits of allowing federally illegal businesses to access banking services.

First and foremost, we must remember we are dealing with an illegal industry at the federal level. As far as I know, the House Financial Services Committee does not have jurisdiction over de-scheduling a drug.

And in my opinion, we are putting the cart before the horse by addressing this issue here in the Consumer Protection and Financial Institutions Subcommittee before the drug is descheduled, but I do welcome the broader conversation.

The biggest question we face is what would happen if this proposed legislation was actually signed in to law? How do we separate legal growers from bad actors attempting to access financial services? Our current anti-money laundering regime is already woefully inadequate and until we modernize the Bank Secrecy Act and anti-money laundering regulations, it would be irresponsible to open up our financial institutions to another major challenge. Similar questions arise regarding FDIC insurance and the movement of money between states that have not legalized marijuana.

In this Committee, the question of when to allow states the prerogative to make decisions for themselves seems to be on a case-by-case basis. When my colleagues are morally opposed to a legal service, such as small-dollar loans, they will fight tooth and nail to ensure the states have no leeway to make their own decision. Yet, here we are acquiescing to the decision of some states, fighting to provide banking services to a federally illegal industry. The bottom line is the law, not personal preferences, must dictate the accessibility of financial services, and as long as marijuana is illegal at the federal level attempts by this committee to legalize the banking of it will create more confusion than clarity.

You know there's a solution to this. The hemp industry solved this problem last fall. They descheduled the drug and now they can grow, manufacture, and distribute their drug. Opioids are a grown chemical that we now allow for medicinal purposes but we do not allow for recreational purposes. The DOJ has confused this situation by being unwilling to support descheduling and yet not being willing to enforce the federal law.

This is like having a stoplight at a major intersection right out here on Pennsylvania Avenue, and the light gets turned off. What do you have? Confusion and chaos. That's what we have today in the banking industry. And while Mr. Perlmutter has got a solution, I'm concerned that it's going to create more confusion than it solves. The reason for the light, just like the reason for law, is to put structure in our society so things can take place, businesses can operate, and yet here we are because enforcement is not in place to make this happen.

Now throughout my life as I've gone through the educational system, civics classes have always said that federal law trumps state law. Until that changes, until the Supreme Court says that the Constitution is a list of suggestions instead of law, I believe that we probably can't do much today other than realize that we have got a problem and we solve it by descheduling the drug. Then I think we can move on to Mr. Perlmutter's suggestion.
With that, I do have another -- if the Chair will permit me just one minute here - I'd like to thank the witnesses for taking the time to testify. I look forward to a very robust discussion, unfortunately, we are missing an important voice on the matter today.

Mr. Chairman, it has been a long-standing practice of this committee to allow the Minority a second witness when the Majority has five or more witnesses. Today, the new Majority has decided to deviate from this practice, which has been in place since Barney Frank's chairmanship. The Minority identified two well-qualified experts who were willing to testify today. It's unfortunate this committee will miss the opportunity to hear testimony from and question one of our nonpartisan expert attorneys from the Congressional Research Service.

David Carpenter has prepared testimony which addresses the impact the SAFE Banking Act could have on federal law. Mr. Carpenter's testimony gives an overview of the existing landscape as it relates to marijuana banking. It also highlights the regulatory and supervisory uncertainty that could result from passage of the SAFE Banking Act.

Mr. Carpenter's role with CRS is to take a middle ground, non-partisan stance and to provide non-biased factual answers to any of the committee's financial and banking concerns.
Without objection, I ask unanimous consent that Mr. Carpenter's testimony be entered into the record.

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