When L.A. City Council President Herb Wesson pitched the idea of a Bank of Los Angeles last week, he singled out the city’s growing pot industry as one that could really benefit.
“Do you know we got people that are going to go home tonight that got a million dollars in cash buried in the backyard, and a million buried in the walls?" asked Wesson.
“We have to make this industry work.”
Even though pot is now legal in California, it’s still illegal under federal law. And since banks are federally regulated, they have to abstain from the marijuana business. So legal marijuana growers and retailers operate in a largely cash-based economy.
“They’re basically forcing these business to commit money-laundering,” said Susan Soares, executive director of the marijuana advocacy group C.A.R.E.
“Because sleeping with your money under your mattress is only half the equation. How do you spend that money? You end up commingling funds or set up all kinds of entities and play the shell game,” said Soares.
There’s yet to be a city or state in the U.S. to create an independent banking system designed to accommodate the legal pot industry, though Colorado lawmakers endorsed so-called cannabis credit co-ops that would work kind of like credit unions.
San Francisco and Oakland are exploring the creation of locally controlled banks. As in those cities, L.A.’s would also focus on areas of the local economy outside of marijuana.
Skeptics like Jack Humphreville say a locally controlled bank sounds like a good idea on paper. But in reality he believes it’s fraught with a host of challenges and potential conflicts for city leaders.
Humphreville keeps an eye on city politics through his blog City Watch LA.
“There’s a lot of regulation. You need money, and you need management," said Humphreville.
"Will (officials) use this as a honey pot, will they be giving loans to all their friends who don’t deserve credit?” he wondered.
An L.A. budget committee led by Councilman Paul Kerkorian is working through those details and is expected to report back to the City Council in the coming weeks.