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Jan 23 (Reuters) – U.S. treasury and law enforcement agencies will soon issue regulations opening banking services to state-sanctioned marijuana businesses even though cannabis remains classified an illegal narcotic under federal law, Attorney General Eric Holder said on Thursday.
Holder said the new rules would address problems faced by newly licensed recreational pot retailers in Colorado, and medical marijuana dispensaries in other states, in operating on a cash-only basis, without access to banking services or credit.
Proprietors of state-licensed marijuana distributors in Colorado and elsewhere have complained of having to purchase inventory, pay employees and conduct sales entirely in cash, requiring elaborate and expensive security measures and putting them at a high risk of robbery.
It also makes accounting for state sales tax-collection purposes difficult.
“You don’t want just huge amounts of cash in these places,” Holder told the audience at the University of Virginia. “They want to be able to use the banking system. And so we will be issuing some regulations I think very soon to deal with that issue.”
Holder’s comments echoed remarks by his deputy, James Cole, in September during a Senate Judiciary Committee hearing on Capitol Hill.
Colorado this month became the first state to open retail outlets legally permitted to sell marijuana to adults for recreational purposes, in a system similar to what many states have long had in place for alcohol sales.
Washington state is slated to launch its own marijuana retail network later this year, and several other states, including California, Oregon and Alaska, are expected to consider legalizing recreational weed in 2014.
The number of states approving marijuana for medical purposes has also been growing. California was the first in 1996, and has since been followed by about 20 other states and the District of Columbia.
But the fledgling recreational pot markets in Colorado and Washington state have sent a new wave of cannabis proprietors clamoring to obtain loans and make deposits in banks and credit unions.
The Justice Department announced in August that the administration would give new latitude to states experimenting with taxation and regulation of marijuana.
But with the drug still outlawed at the federal level, banks are barred under money-laundering rules from handling proceeds from marijuana sales even in states where pot sales have been made legal.
The lack of credit for marijuana businesses, however, poses its own criminal justice concerns, Holder said.
“There’s a public safety component to this,” he said. “Huge amounts of cash – substantial amounts of cash just kind of lying around with no place for it to be appropriately deposited – is something that would worry me just from a law enforcement perspective.”
Holder did not offer any specifics on a timeline for action on banking services for marijuana. Cole in September said the Justice Department was working on the issue with the Treasury Department’s financial crimes enforcement network.
Critics of liberalized marijuana laws have said the lack of credit faced by pot retailers was beside the point.
“We are in the midst of creating a corporate, for-profit marijuana industry that has to rely on addiction for profit, and that’s a much bigger issue than whether these stores take American Express,” said Kevin Sabet, co-founder of the anti-legalization group Smart Approaches to Marijuana. (Reporting by David Ingram in Charlottesville, Virginia; Writing by Alex Dobuzinskis; Editing by Steve Gorman and Lisa Shumaker)
The Failure To Punish Wall Street Criminals Is The Core Cause Of Our Sick Economy
U.S. Attorney General Eric Holder said:
I am concerned that the size of some of these institutions [banks] becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy
As we’ve repeatedly noted, this is wholly untrue.
If the big banks were important to the economy, would so many prominent economists, financial experts and bankers be calling for them to be broken up?
If the big banks generated prosperity for the economy, would they have to be virtually 100% subsidized to keep them afloat?
If the big banks were helpful for an economic recovery, would they be prolonging our economic instability?
In fact, failing to prosecute criminal fraud has been destabilizing the economy since at least 2007 … and will cause huge crashes in the future.
After all, the main driver of economic growth is a strong rule of law.
Nobel prize winning economist Joseph Stiglitz says that we have to prosecute fraud or else the economy won’t recover:
The legal system is supposed to be the codification of our norms and beliefs, things that we need to make our system work. If the legal system is seen as exploitative, then confidence in our whole system starts eroding. And that’s really the problem that’s going on.
I think we ought to go do what we did in the S&L [crisis] and actually put many of these guys in prison. Absolutely. These are not just white-collar crimes or little accidents. There were victims. That’s the point. There were victims all over the world.
Economists focus on the whole notion of incentives. People have an incentive sometimes to behave badly, because they can make more money if they can cheat. If our economic system is going to work then we have to make sure that what they gain when they cheat is offset by a system of penalties.
Nobel prize winning economist George Akerlof has demonstrated that failure to punish white collar criminals – and instead bailing them out- creates incentives for more economic crimes and further destruction of the economy in the future.
(Review of the data on accounting fraud confirms that fraud goes up as criminal prosecutions go down.)
The Director of the Securities and Exchange Commission’s enforcement division told Congress:
Recovery from the fallout of the financial crisis requires important efforts on various fronts, and vigorous enforcement is an essential component, as aggressive and even-handed enforcement will meet the public’s fair expectation that those whose violations of the law caused severe loss and hardship will be held accountable. And vigorous law enforcement efforts will help vindicate the principles that are fundamental to the fair and proper functioning of our markets: that no one should have an unjust advantage in our markets; that investors have a right to disclosure that complies with the federal securities laws; and that there is a level playing field for all investors.
Paul Zak (Professor of Economics and Department Chair, as well as the founding Director of the Center for Neuroeconomics Studies at Claremont Graduate University, Professor of Neurology at Loma Linda University Medical Center, and a senior researcher at UCLA) and Stephen Knack (a Lead Economist in the World Bank’s Research Department and Public Sector Governance Department) wrote a paper called Trust and Growth, showing that enforcing the rule of law – i.e. prosecuting white collar fraud – is necessary for a healthy economy.
One of the leading business schools in America – the Wharton School of Business – published an essay by a psychologist on the causes and solutions to the economic crisis. Wharton points out that restoring trust is the key to recovery, and that trust cannot be restored until wrongdoers are held accountable:
According to David M. Sachs, a training and supervision analyst at the Psychoanalytic Center of Philadelphia, the crisis today is not one of confidence, but one of trust. “Abusive financial practices were unchecked by personal moral controls that prohibit individual criminal behavior, as in the case of [Bernard] Madoff, and by complex financial manipulations, as in the case of AIG.” The public, expecting to be protected from such abuse, has suffered a trauma of loss similar to that after 9/11. “Normal expectations of what is safe and dependable were abruptly shattered,” Sachs noted. “As is typical of post-traumatic states, planning for the future could not be based on old assumptions about what is safe and what is dangerous. A radical reversal of how to be gratified occurred.”
People now feel more gratified saving money than spending it, Sachs suggested. They have trouble trusting promises from the government because they feel the government has let them down.
He framed his argument with a fictional patient named Betty Q. Public, a librarian with two teenage children and a husband, John, who had recently lost his job. “She felt betrayed because she and her husband had invested conservatively and were double-crossed by dishonest, greedy businessmen, and now she distrusted the government that had failed to protect them from corporate dishonesty. Not only that, but she had little trust in things turning around soon enough to enable her and her husband to accomplish their previous goals.
“By no means a sophisticated economist, she knew … that some people had become fantastically wealthy by misusing other people’s money — hers included,” Sachs said. “In short, John and Betty had done everything right and were being punished, while the dishonest people were going unpunished.”
Helping an individual recover from a traumatic experience provides a useful analogy for understanding how to help the economy recover from its own traumatic experience, Sachs pointed out. The public will need to “hold the perpetrators of the economic disaster responsible and take what actions they can to prevent them from harming the economy again.” In addition, the public will have to see proof that government and business leaders can behave responsibly before they will trust them again, he argued.
Note that Sachs urges “hold[ing] the perpetrators of the economic disaster responsible.” In other words, just “looking forward” and promising to do things differently isn’t enough.
Shiller said the danger of foreclosuregate — the scandal in which it has come to light that the biggest banks have routinely mishandled homeownership documents, putting the legality of foreclosures and related sales in doubt — is a replay of the 1930s, when Americans lost faith that institutions such as business and government were dealing fairly.
Indeed, it is beyond dispute that bank fraud was one of the main causes of the Great Depression.
Economist James K. Galbraith wrote in the introduction to his father, John Kenneth Galbraith’s, definitive study of the Great Depression, The Great Crash, 1929:
The main relevance of The Great Crash, 1929 to the great crisis of 2008 is surely here. In both cases, the government knew what it should do. Both times, it declined to do it. In the summer of 1929 a few stern words from on high, a rise in the discount rate, a tough investigation into the pyramid schemes of the day, and the house of cards on Wall Street would have tumbled before its fall destroyed the whole economy.
In 2004, the FBI warned publicly of “an epidemic of mortgage fraud.” But the government did nothing, and less than nothing, delivering instead low interest rates, deregulation and clear signals that laws would not be enforced. The signals were not subtle: on one occasion the director of the Office of Thrift Supervision came to a conference with copies of the Federal Register and a chainsaw. There followed every manner of scheme to fleece the unsuspecting ….
This was fraud, perpetrated in the first instance by the government on the population, and by the rich on the poor.
The government that permits this to happen is complicit in a vast crime.
Galbraith also says:
There will have to be full-scale investigation and cleaning up of the residue of that, before you can have, I think, a return of confidence in the financial sector. And that’s a process which needs to get underway.
Galbraith recently said that “at the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.
As he has repeatedly noted, the economy will not recover until the perpetrators of the frauds which caused our current economic crisis are held accountable, so that trust can be restored. See this, this andthis.
No wonder Galbraith has said economists should move into the background, and “criminologists to the forefront.”
The bottom line is that the government has it exactly backwards. By failing to prosecute criminal fraud, the government is destabilizing the economy … and ensuring future crashes.
Earlier this month, a prominent New York Federal Court Judge – and former Chief of the fraud unit for the U.S. Attorney’s Office for the Southern District of New York (Jed Rakoff) – said:
Not a single high level executive has been successfully prosecuted in connection with the recent financial crisis ….
[If] the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years.
The stated opinion of those government entities asked to examine the financial crisis overall is not that no fraud was committed. Quite the contrary. For example, the Financial Crisis Inquiry Commission, in its final report, uses variants of the word “fraud” no fewer than 157 times in describing what led to the crisis, concluding that there was a “systemic breakdown,” not just in accountability, but also in ethical behavior. As the Commission found, the signs of fraud were everywhere to be seen, with the number of reports of suspected mortgage fraud rising 20-fold between 1998 and 2005 and then doubling again in the next four years. As early as 2004, FBI Assistant Director Chris Swecker, was publicly warning of the “pervasive problem” of mortgage fraud, driven by the voracious demand for mortgage-backed securities. Similar warnings, many from within the financial community, were disregarded, not because they were viewed as inaccurate, but because, as one high level banker put it, “A decision was made that ‘We’re going to have to hold our nose and start buying the product if we want to stay in business.’”
The prevailing view of many government officials (as well as others) was that the crisis was in material respects the product of intentional fraud.
[The Department of Justice doesn’t disagree.] Attorney General Holder himself told Congress that “it does become difficult for us to prosecute them when we are hit with indications that if we do prosecute – if we do bring a criminal charge – it will have a negative impact on the national economy, perhaps even the world economy.”
No one that I know of has ever contended that a big financial institution would collapse if one or more of its high level executives were prosecuted, as opposed to the institution itself.
The Department of Justice has never taken the position that all the top executives involved in the events leading up to the financial crisis were innocent, but rather has offered one or another excuse for not criminally prosecuting them – excuses that, on inspection, appear unconvincing. So, you might ask, what’s really going on here?
[Deferred prosecutions – the current government approach of letting big banks off easy and leaving the individual fraudsters alone – are not the way to go.] Although it is supposedly justified in terms of preventing future crimes, I suggest that the future deterrent value of successfully prosecuting individuals far outweighs the prophylactic benefits of imposing internal compliance measures that are often little more than window-dressing. Just going after the company is also both technically and morally suspect. It is technically suspect because, under the law, you should not indict or threaten to indict a company unless you can prove beyond a reasonable doubt that some managerial agent of the company committed the alleged crime; and if you can prove that, why not indict the manager? And from a moral standpoint, punishing a company and its many innocent employees and shareholders for the crimes committed by some unprosecuted individuals seems contrary to elementary notions of moral responsibility.
These criticisms take on special relevance, however, in the instance of investigations growing out of the financial crisis, because, as noted, the Department of Justice’s position, until at least very, very recently, is that going after the suspect institutions poses too great a risk to the nation’s economic recovery.
Rakoff thoroughly debunks the government’s other lame excuses for failing to prosecute Wall Street criminals as well, such as the “difficulty” of proving “intent” or the “sophistication” of the counter parties.
Indeed, Judge Rakoff notes that the government had a large hand in creating the fraud in the first place. In fact, the government has done everything it can to cover up fraud, and has been activelyencouraging criminal fraud and attacking those trying to blow the whistle.
The failure to punish the fraudsters is the core cause of our sick economy.
Millions of emails and phone calls have been registered, in secret, by US intelligence agencies. It seems the US government is now keeping an eye on all of us – regardless of our citizenship.
|Europeans are very keen on data protection, maybe because of their history. The trust in what is done with your personal data is not very high, and that might be the reason why data protection as a must as an obligation is inscribed in our fundamental laws, in our treaties, in our charter of fundamental rights. So for Europeans it is a basic value and a fundamental right.|
The backlash has been particularly fierce in the European Union. Its justice commissioner, Viviane Reding, is demanding explanations from the US Attorney General Eric Holder. While, in the meantime, authorities in Britain are cracking down on journalists exposing the spy scandal, forcing British newspaper the Guardian to destroy its hard drives.
It was former computer consultant Edward Snowden who leaked the secret information about the spy operations. But Holder, the highest law enforcement official in the US, is now the man at the centre of the story in terms of its global legal ramifications….
- Ec Vice President Viviane Reding Debates With Citizens (brusselsdiplomatic.com)
- Docs leaked by Snowden show NSA spied on Al Jazeera (boingboing.net)
- European Commission leads calls for single privacy law to tackle PRISM intrusion (itpro.co.uk)
- Hundreds of US companies make false data protection claims (euobserver.com)
- Holder to Russia: We Won’t Kill Leaker (foxnews.com)
- Holder to Russia: I Will Allow Snowden to Live (libertyfirewall.com)
- Eric Holder: Well, Maybe Just a Little Forced Nudity and Solitary Confinement… (emptywheel.net)
- Justice Dept.: No Financial Firm Is ‘Too Big to Jail’ (insurancejournal.com)
- Too Big to Jail? (pubcit.typepad.com)
- Did Eric Holder Lie Under Oath? (nationalreview.com)
- House Judiciary investigating whether Holder lied under oath (redalertpolitics.com)
- VIDEO: Holder faces House Judiciary Committee (jtn-network.com)
- Eric Holder: Don’t Ask, He Doesn’t Know (freebeacon.com)
- Breaking: House Judiciary Committee Will Investigate Eric Holder on Perjury Charges (thegatewaypundit.com)
- Obama Admits to Killing Four Americans with Drones (activistpost.com)
- Here’s Eric Holder’s Letter Admitting To Drone-Striking An American (businessinsider.com)
- Obama Admits US Killed 4 Americans in Drone War (news.antiwar.com)
- I Am A Terrorist (financialsurvivalnetwork.com)
- The myth of liberty (thehindu.com)
- Parents Have No ‘Right’ to Homeschool Their Kids, Says Justice Department (ultimatefulfillment.org)
- “I Can’t Take the Loss of Liberty” or, How to Radicalize a Suburban Mom (sgtreport.com)
- Ron Paul Texas Straight Talk: Congress Exploits Our Fears to Take Our Liberty 4-22-13 (dailypaul.com)
Elizabeth Warren Confronts Eric Holder, Ben Bernanke And Mary Jo White On Too-Big-To-Jail | Zero Hedge
- Sen. Warren Continues Campaign Against ‘Too Big To Jail’ Banks (commondreams.org)
- Sen. Warren: Regulators should take big banks to court more often (bizjournals.com)
- Elizabeth Warren Pushes Feds For Answer On Big Bank Enforcement (syndicatednewsservices.com)
- Senator Warren Wants Banks to Admit Guilt (readersupportednews.org)
- Elizabeth Warren Demands Answers, Republican Hypocrisy Called Out, and More (truthdig.com)
- Sen. Warren Asks Fed, DOJ & SEC for Analysis on Settling without Admission of Guilt (lawprofessors.typepad.com)