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Bring back postal banking

I still like this idea.

Postal unions and civil rights groups are among other advocacy organizations, along with the U.S. Postal Service inspector general, pushing USPS to expand into banking. Sen. Bernie Sanders (I-Vt.), a Democratic presidential hopeful, agrees. But USPS, which could use the business, has no interest.

Providing financial services in post offices “could benefit the 68 million underserved Americans who either do not have a bank account or rely on expensive services like payday lending and check cashing,” says an inspector general report issued in May. “The products also could help the Postal Service generate new revenue to continue providing universal service. Because it has a presence in every neighborhood, including many places where there are no longer any bank branches, the Postal Service is well suited to provide such services. In addition, its well-trained workforce is already experienced at handling complex transactions and watching out for related fraud and other risks.”

The push for postal banking received a boost this month with an article by Mehrsa Baradaran in The Atlantic. Baradaran, a University of Georgia School of Law associate professor, advocates a “central bank for the poor,” as an alternative to “the unscrupulous practices of payday lenders.”

Postal banking, she wrote, could provide short-term loans and “potentially drive out the usurious fringe-lending sector, which profits from Americans’ financial woes.” Her article was adapted from her book “How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy.”

USPS officials regularly trumpet what they are doing to improve the Postal Service’s financial situation, including such things as selling greeting cards. But the officials have rejected postal banking.

“While we currently provide our customers with certain financial services, including money orders, electronic funds transfers, and cashing of U.S. Treasury checks, our core function is not banking,” said David A. Partenheimer, a USPS spokesman. Former Postmaster General Patrick Donahoe was more emphatic during his farewell press conference in January. “The key thing for any successful business is to work within their core,” he said. “We don’t know anything about banking.”

They must have forgotten.

Postal banking, known as the Postal Savings System, began operation in 1911 and officially ended in 1967, though the Post Office stopped accepting deposits a year earlier. Initially, savings earned 2.5 percent interest with a half-percent designated for operation of the system, according to a postal service history. “Although bankers first viewed the Postal Savings System as competition,” the history says, “they later were convinced that the Postal Savings System brought a considerable amount of money out of hiding from mattresses and cookie jars.” Most of the money was redeposited in local banks. The Postal Savings System, however, did not include lending, according to Mehrsa.

I’ve covered this before, and continue to be convinced that it makes sense. That Inspector general report quote above is a big part of it, but just having convenient access to their money without having to pay exorbitant fees or be at the mercy of the failings of unregulated “entrepreneurs” would be a huge book for millions of working people. I truly don’t understand the USPS’s objections to this, given their own history. It would be good for their business as well as good for so many people. Keep up the pressure, y’all.

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4 Comments

  1. Bill Daniels says:

    As long as this is a money making proposition for the Post Office, I’m on board with it. With regard to check cashing in particular, as pro-business as I am, I can’t see why a bank can’t be forced to cash their own check for the face value, sans fees. If I write a $ 100 check, the person cashing it at my bank ought to get $ 100. When I was younger, I don’t remember banks charging to cash their own checks.

    With regards to the payday lenders, Kuff, do you have any information about how the CoH’s regulations passed under Mayor Parker have effected those businesses? Did they move out of the city limits?

  2. Paul kubosh says:

    I didn’t even know this was a thing.

  3. state public banks are politically more viable

  4. Christopher says:

    Public banking is far more viable economically, but not politically. It would greatly undermine the current privatization of banks (which talking about corruption are the largest payers of lobbyists in the capital, which is why public banking doesn’t exist outside of North Dakota).

    Additionally, Public banking would promote socialism rather than capitalism. Because ultimately public banking would not be about profit in the sense of dollar amounts, but rather in support of localized production and real investment (jobs, land, ect). Basically putting a community and the people of that community above the priority of profit. Private banking is a tool of capitalism wherein profit is the bottom line, even when that profit is at the detriment of a community and it’s people. Private banks would spend everything they have to vilify and prevent public banking.

    While post office banking doesn’t make as much sense from an economic perspective, it being under one of America’s socialism systems means that it would be more politically viable (not as much at risk of being attack by say… republicans?). Particularly if they are going to highlight post office banking as a profit based banking system (I also don’t think private banks would do anything to directly stop this, only hinder its effectiveness).