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Remember when New York-based Signature Bank (OTCPK: SBNY) became the third financial institution to collapse following the demise of Silicon Valley Bank and Silvergate Capital Corp? This led to some unexpected, if ironic, consequences...the federal government was funding the marijuana industry.
Shortly after Signature Bank collapsed partly due to its investment in cryptocurrency, the Federal Deposit Insurance Corporation (FDIC) transferred all of Signature's deposits and assets to Signature Bridge Bank, N.A., a full-service bank the agency operates as it markets the institution to potential bidders.
A bridge bank structure is designed to "bridge" the gap until the FDIC can stabilize the failed institution and implement an orderly resolution.
Several days later, the FDIC announced that the wholly owned subsidiary of New York Community Bancorp, Inc. (NYSE:NYCB) had entered into a purchase and assumption agreement under which 40 former Signature Bank branches would operate under New York Community Bancorp’s Flagstar Bank, N.A.
Roughly $60 billion in loans remained in FDIC receivership. Flagstar Bank’s bid did not include approximately $4 billion of deposits related to the former Signature Bank’s digital banking business, noted Cannabis Now.
Mina Mishrikey, leader of the private equity firm Merida Capital Holdings that focuses on the cannabis and hemp industries, acknowledged that the seizures pushed the federal government to become a provider of financial services to the marijuana industry, reported the outlet.
How so? It turns out that while the majority of financial institutions deny services to cannabis operators because marijuana is federally illegal, Signature Bank was servicing some regulated marijuana businesses. The lack of banking services is one of the cannabis industry's most enduring struggles.
“The irony is that the US government is now banking cannabis, whether they know it or not because they took over Signature Bank,” Mishrikey said on an Alpharoot podcast.
In April a group of bipartisan lawmakers introduced a cannabis banking bill in Congress. The Senate Banking Committee led by committee chair Senator Sherrod Brown (D-OH), heard testimony on the SAFE Banking Act on May 11 for nearly two hours before adjourning without a vote.
Brown said recently that a long-awaited vote on cannabis banking reform could happen "in the next two or three weeks," as the panel would consider other measures as well.
While the future of the SAFE Act is debatable, “the irony is the federal government, at least temporarily, was itself a bank for the industry,” Mishirkey said.
Photo: Courtesy of Kindel Media on Pexels
