Until the late 1960s, you could go into a post office and deposit money into a savings account while buying stamps or sending parcels.
As a result of the financial panic of 1907, the no-frills Postbank enjoyed growing popularity during the Great Depression. But as commercial banks expanded and offered higher interest rates, the United States’ postal savings system became as obsolete as a black and white movie.
Now, in the wake of yet another financial crisis, the US Postal Service has given new impetus to return to offering basic banking services.
The effort is led by consumer advocates, financial reform groups, postal unions and some leading liberals such as Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) And Sen. Elizabeth Warren (D-Mass.). They say offering services such as paycheck cashing, bill payment, and free ATMs would provide insolvent consumers with an affordable alternative to payday, auto title, and other short-term loans that have been criticized for their high fees.
“We have millions and millions of low income people going to these payday lenders and paying outrageous interest. They are being ripped off right and left, ”Sanders said in October on ABC’s“ Jimmy Kimmel Live ”.
“We can offer our postal service modest banking services to low-income people, where they can cash their checks and do banking,” said Sanders. “I think it will help the Post and it will help millions of low-income people.”
The Inspector General of the Post agrees. It estimates that expanding financial services beyond currently limited offerings that include money orders and international wire transfers could pump $ 8.9 billion a year into the financially troubled agency.
“The postal service has a public mandate to serve the citizens and support the growth of commerce,” the Inspector General’s Office said last spring in a report that presented five potential approaches to expanding banking services. “And although it has to cover its costs, profit is not its main motive.”
The American Postal Workers Union formed a coalition, the Campaign for Postal Banking, which in December presented a petition with more than 150,000 signatures to Deputy Postmaster General Ronald A. Stroman urging the agency to expand its financial offering.
“Big banks are turning their backs on families,” said union president Mark Dimondstein. “Without bank accounts, they fall prey to predatory lenders.”
Postmaster General Megan J. Brennan hasn’t ruled out the idea of expanded banking services after her predecessor rejected the proposal in January when he retired. But she has some reservations.
“While we currently offer certain financial services to our customers, including money orders, electronic transfers and cashing US financial checks, our core function is not banking,” the agency said in a written statement.
There is a sense that the post is a dinosaur, but it’s not a shark.
Mehrsa Baradaran, Professor, University of Georgia
The service said it has “infrastructure that is not ideal as a banking platform” and cited a decline in visits to post offices. In addition, any investment outside of its core mail delivery function will be “likely to be reviewed from both a public and regulatory perspective,” the agency added.
The Postal Service is an independent agency that has relied on the sale of stamps and other services to pay for its operation since 1971. But the growth of the internet and competition from private shippers like FedEx Corp. and UPS took a heavy toll on the agency’s finances.
After peaking in 2006, the total amount of mail handled by the postal service has decreased by 27%. This has resulted in budget deficits compounded by a pre-financing of retirement benefits for its workers demanded by Congress, forcing the agency to borrow up to its $ 15 billion allowance from the Treasury Department.
According to the Inspector General, extensive financial services offer “the best chance for new income”.
It’s not a far-fetched idea. Post offices in many other countries, including the UK, France, China, and Japan, also serve as banks. And from 1911 to 1967, the United States postal savings system offered accounts with an annual interest rate of 2% to reduce competition with commercial banks.
Deposits with US post banks increased during the Great Depression and World War II, when many consumers viewed accounts as more secure than those with commercial banks. But when these banks opened more branches after the war and increased interest rates, the postal banking system fell out of favor and the federal government shut it down.
The Great Recession has sparked calls for a revitalization of the Postbanks as many households have been forced to look for payday loans and other alternative financial products.
A survey by the Federal Deposit Insurance Corp. found that in 2013, approximately 9.6 million households had no one with a bank account. Another 24.8 million households had accounts but also used alternative financial services such as payday loans.
Many poor areas lack bank branches, but most communities have post offices, said Katherine Isaac, an advisor to the postal workers’ union that organized the post banking campaign.
“Even if we put all payday lenders out of business, there is a concern that there is still no one-stop shop,” said Isaac. “The banks are not there. You have left these communities. But the post is here. “
The postal service is the most popular federal agency – according to a recent poll by the Pew Research Center, 84% of respondents have a positive opinion about it.
“I would guess a lot of people trust the post office clerk with their money more than those Wall Street traders,” said Baradaran, an advocate for the post banks. “You get the feeling that the Post is a dinosaur, but it’s not a shark.”
Congress would have to pass a law that would allow post offices to take deposits and make loans. However, the postal service could use the existing powers to expand some offerings, e.g.
“This is not a cash cow for the Post,” said Baradaran. “But it could save her.”