Should the U.S. Postal Service offer basic banking services?

There have been some interesting articles floating around lately about the potential benefits of expanding the duties of the U.S. Postal Service to include basic banking transactions. Senator Elizabeth Warrant has expressed interest and the USPS inspector General penned a white paper on the topic recently. It’s not hard to understand why. For the past few decades it has been made pretty clear that the big banks are not exactly catering to holders of small accounts or people who just need to cash a check. Some abuses in practices like overdraft fees even managed to spur action by Congress a few years back.rural post office sign

These piece by Matthew Yglesias in Salon approaches the topic with the goal of making the USPS more financially sustainable, but goes on to walk through why this idea may actually be good banking policy as well. Ten percent of Americans are “unbanked” and living without access to mainstream banking is costly. They rely on high-fee check cashing outfits or on prepaid debit cards. Among the reasons Yglesias cites for this new “public option” in banking are the fact that the USPS infrastructure already exists and is accessible to Americans, and using the Postal Service would be easier than starting up a new public bank because it already has a brand and one that actually includes the remnants of the old Postal Savings system, e.g.  processing money orders. Yglesias points out that is not a new idea by American standards or international ones:

Postal banking turns out to be fairly widespread in foreign countries, including Israel, South Korea, Ireland, and Germany. We even had a postal bank here in the U.S. for several decades, the Postal Savings System, inaugurated in 1911 and closed in the mid 1960s when high inflation made the system’s statutorily capped interest rates too low to be viable.

Mike Konczal from the Roosevelt Institute also recently offered this compelling look at the case for the public banking option via the USPS. It turns out that what is being proposed is actually quite like something that already exists, namely Direct Express, which is run by the US Treasury Department in partnership with Comerica Bank. “The program allows unbanked recipients of Social Security, federal disability and a few pension-related federal programs to receive their benefits on a debit card.” Direct express, Konczal argues, is already a successful public banking option of sorts and could be expanded via the Postal service. He eloquently points out that the free market won’t function properly unless everyone has access to it, and that includes affordable and accessible banking.

The ability to participate in markets freely is a fundamental American right. That so many citizens struggle to access money without becoming entrapped in a predatory nightmare is an affront to our values. Luckily, we have the tools to solve it. The only question is whether we will use them.

The proposal is not likely to be considered in the immediate future but it is expected that some slots on the USPS Board of Governors will become open soon, allowing the President to appoint some potential supporters of the idea. Stay tuned.

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