Today, Senator Reverend Warnock called on the Government Accountability Office (GAO) to study the economic effects of the War on Drugs and the impact that legislation to regulate financial institutions that serve the cannabis industry, like the SAFER Banking Act, would have on the country’s racial wealth gap

In September, Senator Reverend Warnock, a member of the Senate Banking committee, was the lone Democrat to vote NO on the SAFER Banking Act during a committee hearing

 The Senator cited his grave concerns that the SAFER Banking Act focuses solely on benefitting wealthy cannabis investors while doing nothing to make the millions of Americans who have been impacted by cannabis criminalization financially whole or to restore the communities that have been hardest hit by the War on Drugs

Senator Reverend Warnock: “As Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, I’m focused on conducting oversight and passing financial policies that improve economic well-being for hardworking people all across America“

Washington, D.C. – Today, U.S. Senator Reverend Raphael Warnock (D-GA), chair of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, called on the U.S. Government Accountability Office (GAO), often referred to as the “congressional watchdog,” to study the economic effects of the War on Drugs and the role that financial institutions can play in addressing these effects. In a new letter to GAO Comptroller General Gene Dadaro, the Senator called for the study to investigate the effects that legislation to regulate financial institutions that serve the cannabis industry, like the SAFER Banking Act, would have on the country’s racial wealth gap.

“As Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, I’m focused on conducting oversight and passing financial policies that improve economic well-being for hardworking people all across America,” said Senator Reverend Warnock.“Doing so requires a fuller understanding of the War on Drugs and its vast consequences on families across America.”

Senator Warnock’s letter highlights the role that financial institutions can play in addressing the significant economic harms caused by the War on Drugs, including its effects on the racial wealth gap. These institutions can determine who has access to small business lending opportunities, which play critical roles in community development. This is especially relevant to addressing the racial wealth gap since research shows that white-owned small businesses are twice as likely to receive full approval for financing in comparison to their Black- and Latino-owning counterparts, even when accounting for credit risk. There is also evidence of disparities at the individual level, with white applicants having higher rates of approval for mortgage loans than people of color.

Since the War on Drugs began in 1971, the United States has seen a dramatic increase in drug-related arrests and incarceration. The U.S. prison population increased from less than 250,000 in 1975 to over 1.4 million in 2019 — and that figure jumps to over two million people after including jails. Many of these individuals had a drug offense listed as their most serious crime. Research shows that cannabis use rates are roughly similar among Americans across society, but Black Americans are nearly four times more likely than white Americans to be arrested for marijuana possession. Not only that, Black incarceration rate is nearly five times as high as the white incarceration rate. Sadly, these issues don’t end once an individual reenters society: criminal history can prevent them from accessing housing, jobs, food benefits, and sometimes a driver’s license.  

The Senator’s letter follows his recent actions to shine a light on the urgent moral need for Congress to address the racial wealth gap while it works to pass financial policies for the cannabis industry. In September, Senator Reverend Warnock was the lone Democrat to vote NO on the SAFER Banking Act during a Senate Banking committee hearing. The Senator cited his grave concerns that the legislation focuses solely on benefitting wealthy cannabis investors while doing nothing to make the millions of Americans who have been impacted by cannabis criminalization financially whole, or to restore the communities that have been hardest hit by the War on Drugs.

The letter was signed by Senate Banking committee members Elizabeth Warren (D-MA), Tina Smith (D-MN), and John Fetterman (D-PA).

Find the full text of the letter HERE and below: 

Dear Comptroller General Dodaro,

Decades of the War on Drugs have hollowed out communities across America. However, the federal government has yet to account for the economic consequences of these policies. As Chairman and Members of the Subcommittee on Financial Institutions and Consumer Protection of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, we request that the United States Government Accountability Office (GAO) initiate a study regarding the economic effects of the War on Drugs and the role that financial institutions can play in addressing these effects. Such a study should also investigate the effects that legislation to regulate financial institutions that serve the cannabis industry would have on the country’s racial wealth gap. 

The War on Drugs began in 1971, ushering in federal and state policies that have caused dramatic increases in drug-related arrests and incarceration. From 1975 to 2019, the U.S. prison population increased from under 250,000 to over 1.4 million. Even today, drug-related arrests remain high, at over 1.5 million drug arrests per year.

These policies do not fall evenly on communities across the country. For example, one in four people arrested in 2015 for drug offenses were Black despite similar rates of use across race and ethnicity, Black incarceration rates are five times higher than those of white Americans, and 80% of people incarcerated for drug offenses in the federal prison system are Black or Latino.

Arrest and incarceration related to the War on Drugs can have long-lasting effects on economic well-being. Existing research demonstrates that a criminal history can have significant collateral consequences on individuals after they have completed their sentences. Some states prohibit those with a criminal record from voting, accessing housing, or obtaining employment in specific sectors.

These barriers can prevent individuals from building wealth and potentially contribute to the persistence of the racial wealth gap. In 2019, the Federal Reserve Bank of St. Louis found that the median white family had $184,000 in wealth, compared to $23,000 for Black families. Similarly, rates of white homeownership are considerably higher than those of their Black and Hispanic counterparts: 74% of white households versus 44% for Black households and 48% for Hispanic households.

Financial institutions can play an important role in addressing any economic harms caused by the War on Drugs, including its effects on the racial wealth gap. For example, financial institutions can determine who has access to small business lending opportunities, which are critical in community development. Studies have shown that white-owned small businesses are twice as likely to receive full approval for financing in comparison to their Black- and Latino-owned counterparts, even when accounting for credit risk. We also see disparities at the individual level, with white applicants having higher rates of approval for mortgage loans than people of color. These inequities can contribute to a vicious cycle in which minority communities cannot accrue wealth through the same means as their white counterparts.

As Chairman and Members of the Senate Banking Committee’s Financial Institutions and Consumer Protection Subcommittee, our role is to ensure oversight and regulation of financial institutions that begins to address these historical harms and improve economic wellbeing across America. Doing so requires a fuller understanding of the War on Drugs and its consequences on families across America. With these concerns in mind, we request GAO expeditiously conduct one or more studies on the following topics: 

• To what extent would allowing financial institutions to bank state-sanctioned cannabis significantly ameliorate any negative economic effects or disparities arising from the War on Drugs and, if so, to what degree; 
• What federal actions or policies (regulatory, legislative, or otherwise) would reduce regulatory uncertainty and facilitate the role financial institutions can play in addressing the effects of policies related to the War on Drugs, specifically in communities of color who have dealt with the negative effects of these policies;
• Economic effects of federal, state, and local policies to prosecute the sale, possession, use, manufacture or cultivation of cannabis, including the collateral consequences of arrests and incarceration; 
• Whether these economic effects differ across the country, including by race, gender, socioeconomic status, or other classifications as appropriate, and whether those economic effects have contributed to widening inequality, including of the racial wealth gap;
• If economic effects exist, to what extent (if at all) communities have recovered from those economic effects, especially those communities with high rates of prosecution and incarceration under the War on Drugs; and 
• Whether state policies to decriminalize or legalize cannabis have significantly ameliorated the negative economic effects or disparities arising from the War on Drugs and, if so, to what degree. 

We look forward to your timely response on this issue of critical importance. Sincerely,

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Title and affiliation are provided for identification purposes only. A pastor and social justice advocate, Senator Reverend Raphael Warnock was elected to the United States Senate in 2021 and reelected for a full term in 2022. The Senator serves on the Senate Agriculture, Banking, and Commerce committees, as well as the Senate Aging Committee.