MBank’s Great Joint Venture Goes Up In Smoke!

Posted on by Phil Querin

Crossing out Plan A and writing Plan B on a blackboard.His head was bent in sorrow, green scales fell like rain,
Puff no longer went to play along the cherry lane.
Without his life-long friend, puff could not be brave,
So puff that mighty dragon sadly slipped into his cave.

Puff The Magic Dragon – Peter, Paul, and Mary, 1963

The Portland Business Journal reports that MBank’s great joint venture has gone up in smoke.  [“Oregon’s MBank to abandon cannabis lending, let 70 clients go”] Gosh it wasn’t that long ago the bank big wigs first took the leap into the pot business – although I don’t know anything about cannabis lending; I thought all the growers, distributors, dealers, and various other murky figures needed was a safe place for their cash – besides the back yard, attic, crawl space, air vent, freezer, and other assorted disingenuously “secret” places.

I assumed MBank’s move would have had all the other state and regional banks toking talking about following suit. It was only last August 2014, that I posted a story (here) about the bank’s gutsy move. With the “M” in “MBank,” banking marijuana cash seemed like a natural business model. [Opening a branch office in Weed, California will have to wait until that state’s voters follow Oregon and Washington’s lead, so folks can drive the entire length of Interstate 5 stoned.]

In what has to be the unintended pun of the year, MBank’s President and CEO, Jef Baker[1] was quoted in the article as saying: “MBank entered the business to provide quality banking services to a growing but underserved industry.” [Italics mine]

In another Business Journal article [“Mbank: Capacity, not regulator fear, led lender to abandon Colorado pot plans”] Mr. Baker was quoted as saying:

“We were inundated with requests. We had to step back and say, ‘Wow, are we really ready for this?'”

Hmmm. Who ever heard of a bank turning away business?  I remember when banks would give you a toaster for opening a savings account. According to the article, “The Denver Post reported that the retreat was actually “pressed by federal banking regulators who stepped in late last week to tell MBank executives that crossing several states to work with an industry that remains illegal under federal law was simply too risky.”

However, Baker said the lender “just can’t adequately serve the Colorado market at this time. Our hope is to develop infrastructure and at some point re-enter that market.”  [Italics mine.]

Riddle me this Batman: Why didn’t Mr. Baker wait until July 1 of this year, when Oregon’s recreational marijuana law went into effect?  He would not have had to worry about folks crossing state lines from Colorado with bags of money to deposit in his bank.  I’m sure there would have been plenty of Oregon customers to serve.

And what “infrastructure” do you suppose the MBank hopes to develop?  Just have off-street parking discretely behind the building, add a drive-up window (bullet-proof, of course) for customers to off-load their bags of cash, grab a deposit receipt, and speed away. How complicated is that?   ~PCQ

[1] Yes, just one “f”. Perhaps it was for search engine optimization….

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