Via Matthew Yglesias at Vox:
Could the US Postal Service improve its financial position by becoming a bank? And could it change the financial sector for the better in the process?
This idea, known as postal banking, has become increasingly main- stream over the course of 2014. And while there’s no indication such a change is imminent, it could be achieved without congressional action or any new tax revenue — exactly the sort of idea activists are looking for in a time of gridlock…
Broadly speaking, postal banking is government provision of banking services — typically relatively small-scale checking and savings accounts along with associated payment services. Historically and internationally, government-run banks have typically been paired with government-run mail services — hence postal banking.
A postal service requires a nationwide series of retail establish- ments, which is exactly the physical infrastructure that a basic banking operation requires. Postal services also dabble, via the sale of stamps, in a kind of quasi-financial business as part of their day-to-day business. Meanwhile, governments have often under- taken various policy initiatives to encourage thrift among their citizens and ensure a stable and credible payment system. Consequently, it’s been common at various times and places for governments to permit or direct their postal services to get into the banking industry…
Most basically, USPS could offer a low-fee no-interest checking account featuring a debit card. Checks could be deposited at post offices or via a smartphone app, and the postal account would allow you to pay bills or set up direct deposit. A more elaborate proposal is that “the Postal Service could partner with a bank to offer an interest-bearing savings feature on the Postal Card.” A savings account, in other words.
Last, the IG suggested that the Postal Bank might make small-scale personal loans — in effect competing with payday loan operators and pawn shops.
The report estimates that $89 billion a year is spent by consumers on non-bank financial services — check cashing fees, prepaid debit card fees, payday loans, etc. — and that it’s plausible to imagine the USPS capturing perhaps 10 percent of that market…
Chris Farrell at BloombergBusinessweek just chimed in:
… more than a quarter of American households (PDF)—68 million adults—aren’t included in the mainstream financial system or exist on its fringes. Many in this state are working- and middle-class families, young people, immigrants, rural residents, and low-income families. The U.S. today looks like 19th century Europe, with large numbers unable to access banking services, says Sheldon Garon, a professor at Princeton University and the author of Beyond Our Means: Why America Spends While the World Saves. Just mull that thought over for a moment.
The good news is that both European & Japanese history demon- strate that it isn’t hard to boost financial inclusion and savings rates. Europe managed to bring basic banking services to most of its population in a relatively short period of time starting in the late 1800s, thanks to the adoption of postal banking systems, which turned national post office networks into savings banks as well… (It’s intriguing to note that while Europe and Japan worked at democratizing savings, the U.S. emphasized the democratization of credit.)…
Did you know that we once had a postal banking system? The service started in 1911. “The legislation aimed to get money out of hiding, attract the savings of immigrants accustomed to saving at Post Offices in their native countries, provide safe depositories for people who had lost confidence in banks, and furnish more convenient depositories for working people,” notes the U.S. Postal Service website (PDF)…
The USPS Office of Inspector General revived the idea in a white paper published in late January 2014. “While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous,” notes the report, titled Providing Non-Bank Financial Services for the Underserved (PDF). “The Postal Service also is among the most trusted companies in America, and trust is a critical element for implementing financial services.”
The Pew Trust held a one-day conference in July to discuss the issue, leading to a post on its website titled “Should the Post Office Offer Financial Services?” My one-word response after watching the conference’s webcast: Yes…
All emphases in bold are mine, to highlight the main roadblock: The
vampire squids financial service industries are literally making bank off the people who can least afford that skim. Even the simplest, most defensible step into reviving postal banking — setting up an EBT card system where low-wage workers could have their paychecks deposited and pay bills electronically, I’d guess — would come directly from the blood money profits of those patriotic financiers who skim “service charges” on every company-branded EBT card, every check-cashing transaction, every money order or grocery gift card.
The Post Office still has a link into the finance sector, as everyone who’s ever purchased a money order knows. It’s hard to see why the lowest-profit, lowest-risk banking tasks shouldn’t be available to all those millions of “unbanked” American households, just because America’s least popular profiteers don’t want it to happen.
I would like to see that.
But in my mind, I’m picturing banking services being made available at traditional stand-alone dedicated USPS facilities. I don’t really care for the idea of people doing their banking at the “USPS” at the local Staples.* I’d be pretty sure that Bain Capital would be getting its cut under that scenario.
*Truth be known, I don’t really care for the USPS to have an official presence at the local Staples, but I guess that particular toothpaste has left the tube.
Davis X. Machina
My son was a happy customer of PostFinance during his student time in Switzerland. There were a few weirdnesses involving foreign exchange transactions, but it was far and away the best deal for the small customer.
without a doubt – ONLY at real post office offices!
And, I believe they should declare the internet a public communications function, and offer high-speed ( I’m talking South Korea quality and speed) to every address for, oh I dunno, … … free? or $10/month?
No reason for half measures either. Give everyone an account at the Fed, and put Fed ATMs in post offices. The Fed clears all the checks anyway, so no reason not to allow people to make deposits and cash withdrawals to and from their fed accounts. Large efficiency gains for the economy; check cashing and pay check servicers create needless friction, not to mention moving money out of the hands of high MPC consumers.
This is another instance of obviously good public policy being somehow impossible to implement, because private sector.
Only if Hank Paulson is Postmaster General.
Exorciso te, immundíssime spíritus, omnis incursio adversarii, omne phantasma, omnis legio, in nomine Domini nostri Iesu Christi eradicare.
Git yer postal bankin’ away from me.
@richard crews: Just pull fiber to all post offices, and provide a wireless connection for local municipalities to use. Wifi onsite of course, and terminal kiosks. Again, obviously good public policy. You could pay for the onsite kiosks with voluntary contributions.
The Other Chuck
Actually that’s a secondary reason. The primary reason it won’t happen is because liberals are for it and the fuck-you party is still in power.
@SiubhanDuinne: No reason not to have ATM like services at Staples. A part of the benefit would accrue from ubiquity of basic services — minimizing banking deserts, especially for people juggling those iffy jobs with variable hours.
eta but agreed as to as little outsourcing of services as can be managed.
This is actually a really good idea. The GOP will lose their shit over the idea, because 300% payday loans are the most American idea ever, but it would help a lot.
Oh, for f*ck’s sake. Both Matthew Yglesias and every single Balloon Juice commenter know two things:
1. Postal banking–like single payer healthcare–is a tremendously good idea, and its usefulness and practicability has been demonstrated in many other countries over a long (decades if not centuries) period of time.
2. There is absolutely NO WAY that postal banking, or anything resembling it, will be implemented as long as the obstructionist Koch-Tea Party faction controls Congress and the Supreme Court.
Now go on, BJ commenters, and run the thread out to 100+ comments of high-minded idealistic Pollyannaism. See you on the other side.
Villago Delenda Est
We need to get Buffy on these creatures, stat. Wooden stakes out. Garlic. The whole nine yards.
Elizabeth Warren as Buffy.
Anything to drive payday lenders out of business is a good thing.
Perhaps it’s different in other parts of the country, but I have three or four Post Offices within easy driving distance of me, and only one Staples. So, for me at least, the “banking desert” argument in support of POs at Staples just isn’t relevant.
No reason why Staples can’t have an ATM — lots of retail establishments do. Again, my concern (well, one of them) is that with this kind of privatizing it’s the Staples shareholders who are going to make money off it.
@Villago Delenda Est:
The proper banks are not the problem. It is the non-bank financial system – check cashing places, payday lenders – who are the worst of the worst.
@SiubhanDuinne: part of my former job was keeping track of all the little post offices getting closed, so I’m probably primed in that direction.
This, a thousand times, this. Which means it will never be allowed to occur, those bastards are very powerful.
Mr. Oliver has some thoughts about them, in case you’ve not seen it.
This. The Post Office has already cut way back on the number of actual post offices to the point that a lot of people who we’re most trying to help would be unable to use their services if we limited them to official locations.
Villago Delenda Est
@Gene108: The “proper bank” that is Bank of America was involved in the most fantastic ripoff of the general public and investors alike, the mortgage backed securities scam.
Our “proper banks” are for the most part parasites.
Postal banking is not like single-payer. Single-payer works for the countries that adopted it because they did so decades ago and built their healthcare system around it.
It would be a mess to implement it in the USA now.
Postal banking would fill a need for people, who do not use traditional banks for their financial transactions, but still have a need to cash a check or get a small loan without getting ripped off by guys charging interest rates and fees that would make a mobster loan shark blush, because they are so obscene.
In short, there is no need to rip up the healthcare system and go with single payer, because there are other ways to insure everybody,. There is a need to drive check cashing places and payday lenders out of business because they are legal loan sharks, who should be in jail.
@James Gary: But public banking at the state and local level, like they have in North Dakota, is at least getting a hearing a few places around the country. Gotta start somewhere with getting the ideas out. Along with postal banking, we used to have a financial transaction tax in this country, too; apparently both these have transformed into evil socialismalizeralinging.
Fuck that shit. When the Republicans threaten to throw a hissy fit over anything the President suggests, it’s as if they’re not throwing a fit over anything. He’s going to get the same fight no matter what course of action he chooses, so he might as well choose the one that best serves the interest of the country. Otherwise, he might as well go on a 2 1/2 year golf vacation for the remainder of his term.
I’ll say it again..
THERE IS NOTHING WRONG WITH THE FINANCIAL POSITION OF THE UNITED STATES POSTAL SERVICE….
Just stop making them pay SEVENTY-FIVE YEARS INTO THEIR PENSION FUNDS
but, the banking thing is a good idea and would be terrific for low-income folks of this country
This really has nothing much to do with the issue under discussion, but….
I have very fond memories of the post office building in the Chicago suburb where I grew up. First and foremost, it was a glorious Art Deco building, designed by Charles E. White, Jr., who worked in Frank Lloyd Wright’s studio for several years.* Whenever I set foot in it, it was like entering a magnificent temple. Inside, there was a huge golden star inlaid into the marble floor, and while my mother was at one of the wickets buying stamps or mailing packages, I worked my way around the star points practicing the classic “five positions” of ballet.
Before the ugly USPS acronym spattered its way across ugly one-story dun-painted cinderblock post offices throughout the land, the PO in Oak Park had emblazoned across its façade the words UNITED STATES POST OFFICE. As a child, I found this so impressive that I genuinely believed this building was the Post Office for the entire country — it was that gorgeous.
In those days, post offices were fucking Post Offices.
(Lawn, kids, off.)
*White also married the daughter of the man who owned the FLW-remodeled house in which I grew up. But I didn’t learn that until years later.
@Villago Delenda Est:
BoA was not legally allowed to charge its customers 500% interest on a loan. BoA’s recent settlement was for defrauding other financial intuitions. They were not robbing their customers blind by charging loan shark interest rates.
Let’s do it, and let’s make it a wedge issue between sane people and Republicans. Great post (no pun intended), thanks.
Well, Yglesias above says this:
So he’s suggesting some kind of executive action, right? If that’s possible, the Teahadists in congress can go hang. And if the PO had banking services before, I don’t think there’s much Roberts & Co. could say about it.
I prefer cruise missile strikes on payday loan places, myself, but I guess there would be less collateral damage if we did it this way.
O/T, and it’s Hodor!bait but the Bulgarians are having fond memories of the good ol Soviet days.
Mike in NC
This proposal needs to be run by Darrell Issa, who will happily drown it in a bathtub provided by Grover Norquist.
As a child, I had a post office bank savings account. I had a passbook. I would make deposits to my account and the postal clerk would receive them and update the book.
Aside to James Gary: ya know, I’m sure you think you’re being realistic and pragmatic and all that, but your attitude purely sucks.
Dog On Porch
Would Hillary Clinton support a people’s bank? Inquiring minds want to know.
It’s a fair question to ask anyone who presumes to be presidential timber.
Excellent idea. Do it.
Of course there isn’t. But the Southern Fried GOP needs to keep the crackers riled up.
Would swear there was an identical thread on this same topic not all that long ago.
1) Post offices in may locales have already severely cut back the hours which they are open to much shorter than bankers’ hours. Can foresee long, long lines and waits for customers who want to transact business in person. Many facilities just do not have the physical space (or ample parking space) to handle that.
2) Can also foresee implementation being seen as an incentive by large banks to divorce themselves from offering services to the bottom quintile of their current customers and moving to exclusivity in providing traditional banking to only the more well-to-do.
3) Unless there is also included a government owned or contracted widespread network of ATMs, can also see a quantum leap in ATM transaction fees on the horizon.
If Yglesias is correct that the President has authority to expand some USPS services, then I think Obama should do so after briefly trying get a few people appointed to the USPS board of governors.
If the House GOP is going to sue and/or impeach Obama no matter what he does, I think asinine charges over something that will be popular with the public like postal banking would be A-OK fine with me.
I do not share the qualms other people have with locating postal services in other businesses. I do not see how it is different from having retail banks renting small offices in supermarkets that I see around in California. I do have a big problem with having non USPS employees do significant USPS work. And if Obama goes ahead and you see USPS personnel in their little supermarket office next to Wells Fargo;’s little supermarket office, the GOP will go apeshit over it and that will be nice to see also.
I have been very happy with European postal services, most of which have been fully or partially privatized, and can still offer innovative cheap and easy useful services to the public. The problem is regulatory capture and exploitation of public or public/private partnerships for private corporate game.; So far, Europe, or at least the parts i have spent time in, have managed avoiding that better than the U.S.
Like other countries, the USPS could be offering a lot of useful services to the public besides postal banking like internet access and personal financial services. And, besides getting rid of the ridiculous and purposely destructive pension funding scheme Congress laid on them, they need to provide innovative services to get a financial cushion, at least from what I have read from economists who have studied it.
Jacy, in case you are reading… I have been wondering how your test went earlier this week, obviously hoping for good results. I hope you are doing okay.
Ah. The “Public Option” of banking. Great idea, certain to happen.
Sorry but the major banks are a problem. Used to use BofA(stands for Bank of Assholes, no matter what they tell you) and if I deposited a thousand dollars cash at 9:15am that wasn’t accredited to my account until midnight. If I then used my debt card, thinking I had a thousand dollars in my account, they would charge me $35 for each transaction. They knew the cash was there and they paid out the money. Once did that very thing and I got charged $105 in one day for using less than $200 of my own money. Fuck them. Should I have known better? Better question, should I have had to know better? Their computers can track my card usage to the second but can’t tell if I’ve put cash in the bank? Bullshit. Could the PO be any worse than the big banks/payday loan fuckers? No. Could having the PO be in the low end banking business exert some control over how bad banks screw their customers? Yes. I’m all for it.
Awesome idea, great work, President Warren, oops I was dreaming there. I still have President
‘hand job for WallySt’ Obummer. Lets all get behind this Great Lady and Support her on this.
Get after your CongressCritter. This is a Populist issue that can unite the regular americans, left and right.
@Bobby B.: to paraphrase corvis:
Pedicabo ego vos
Use a Credit Union. Fewer fees. Middle class friendy. Screw the big banks.
My credit union sucks & is VERY user unfriendly (it was not always so) They now want to merge with another crappy CU known for poor service. We are looking to change but don’t want to go from bad to worse.
And come up with infrastructure … how?
In a parallel universe where unicorns shit out infrastructure funding in trillion-dollar tranches, this would be a fantastic idea.
In this one, where’s that trillion dollars coming from?
They won’t have to ditch those customers. As soon as there’s a reasonable alternative, most of those customers will leave them first. The banks are screwing them over so hard, I expect the bottom tier of customers to leave en masse as soon as there’s anywhere to desert to.
In a word, yes. Will the Congress allow it? No. With those Teatards in power? Their whole goal is to make it a private enterprise.
@ruemara: Not quite. Worse than that. I think the private companies only want to skim off the profitable bits, and leave a starved postal service to provide crummy bare bones service to areas and populations that do provide adequate demand to support for-profit service. I don’t think FedEx and UPS want to be responsible for rural delivery of regular mail, for example.
I think in the end, payday loan companies and banks will make a bigger howl about postal banking and other innovative services than private delivery companies, who see a role for a USPS in their world, though not one anyone not a company exec or rich shareholder would want to see.
Edit: to clarify, I think the teabaggers and GOP congresscrooks are more at the bidding of payday loan companies and big corrupt US finance industry in their decisions on USPS. If they delivered up whole USPS mandate to private delivery companies, they would not get a whole load of thanks.
And I forgot telecom companies. Finance and communications (two real gems of U.S. corporate culture) can see what other postal services are doing around the world to adapt to economic and technological innovation, and I think they like it less and have more to fear from it in terms of losing big fat profits, than private delivery industry.
Villago Delenda Est
@burnspbesq: Your client base. Their taxes need to be radically raised.
Some ideas are too good and too obvious for our system to allow them to happen.
Law is in effect now so no Congressional approval needed.
The article states: “…it could be achieved without congressional action or any new tax revenue…”
So how is that done? Presumably, by executive order?
And man, won’t the loan sharks squeal like stuck pigs!
@jl: My concern is this. Why wouldn’t FedEx or whoever want to be paid for rural service, and then not do it?
The assumption we’re working under is that companies get paid for service in a ‘market’ where they’re chosen or passed over based on how good they are at that service.
I don’t think that accurately describes ‘free market capitalism’ at all. I think companies try to maximize getting paid, and try to SEEM good if and only if it’s actually necessary to seem good or even bother. If $1000 of propaganda is more effective at that than $1000 of infrastructure, they won’t even divvy the resources up, they will feel obligated to go 100% for the propaganda and zero for the infrastructure.
That’s because market capitalization is not a real-world thing, it’s collective opinion and it is the collective opinion of the stockbrokers, who as a rule are granny-starving bastards with a hard-right agenda and the sincere belief that the universe is a zero-sum crab bucket with just a few winners, everyone else being a loser who must lose HARD that the winner may win.
Consider the term ‘public servant’, and the phrase ‘goods and services’. Just because rightwingers and capitalists (used as one might say ‘Methodists’ or ‘Objectivists’) have tried to make the term seem vile, doesn’t mean you gotta obey ’em. Public service can be an awesome thing and human beings are quite capable of being dedicated to such a role, sincerely. We cooperate where we can, it’s a human trait.
Cooperators can beat out isolated merciless-shark types. This is why the sharks would like to see everybody competing on shark terms. It’s way past time for different rules.
I can hear the screams already.
There are a large number of unbanked in the US and many of them use the post office for money orders and such. I think it worked before so I don’t see why it couldn’t work again.
Because 100+ comments of depressing hope-sucking effortless cynicism is so helpful.
Hey, it worked for W.