Fed Chair Powell Says Banks In 'Very Difficult Position' With Cannabis

In testimony before the Senate Banking Committee on Tuesday, Federal Reserve Chair Jay Powell said "clarity" is needed on cannabis banking regulations.

"I think it would be great to have clarity," Powell said.

A Difficult Place

Cannabis was just one issue raised during two days of hearings that delve into the United States' economic backdrop. The subject would not come up until roughly a half-hour into the Fed chairman’s two-hour testimony, when New Jersey Sen. Bob Menendez broached the subject.

Menendez sought answers regarding the security risk posed by a $1-billion industry operating entirely wish cash due to federal regulations. Powell answered that he did not have any information to provide any clarity on the situation — before adding his own desire for clarity on the matter.

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"Financial institutions and their regulators and supervisors are in a very difficult position here with marijuana being illegal under federal law and legal under a growing number of state laws," Powell said.

"It puts financial institutions in a very difficult place and puts the supervisors in a difficult place too. It would be nice to have clarity on that supervisory relationship."

Powell also said in a response to Menendez that more clarity on insurance for marijuana businesses would also be helpful.

Other Matters

The Fed chairman also fielded questions on matters such as tightening incomes in the labor force, and suggested globalization could be a source of the concern — as could 10 years of stagnant wage growth between 2000 and 2010.

Slower growth in Europe and China could slow forward progress in the United States, Powell said, adding that that the U.S. central bank will not rush any policy changes.

"When I say we're going to be patient, what that really means is, we’re in no rush to make a judgment about changes in policy."

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