Senator and presidential candidate Bernie Sanders has once again added his voice to a growing movement to bring banking to the United States Postal Service (USPS).
"I want to see our post office be reinvigorated," Sanders said in a Fusion interview this week with Felix Salmon, and postal banking is "one of the ways that I think we can help not only the U.S. Postal Service, but help a lot of low-income people."
Millions of Americans are "unbanked," meaning they do not have (and cannot get) bank accounts for one reason or another. This means they cannot easily cash checks, pay bills, save a bit of money, get a small loan in an emergency and other simple and basic banking services. This leaves them vulnerable in the predatory path of payday lenders and check cashing services, where exploitative fees and incredibly high interests rates eat them alive and leave them poorer than ever.
In her New York Times Sunday Book Review of ‘How the Other Half Banks,’ by Mehrsa Baradaran, Nancy Folbre explains the problem:
People living from paycheck to paycheck, with little surplus to buffer emergencies, occasionally need to borrow money, whatever the interest rate. That rate is typically as high as state laws allow, and short-term loans are designed to encourage rollovers that result in ballooning interest.
Payday-loan operations that require borrowers to sign over a share of a future paycheck have proliferated in poor neighborhoods and surround many military bases, as do offers to make short-term loans secured by the title to an automobile. A two-week payday loan with a fee of $15 per $100 — which Baradaran describes as typical — is equal to an annual rate of about 400 percent.
Poverty is expensive, even for those who aren’t debt-laden. The average family earning $25,000 a year but without a bank account spends about $2,400 a year — more than it spends on food — on financial transactions. Even those who manage to open regular bank accounts face disproportionately large fees and harsh penalties for small overdrafts.
There must be something We the People could do for the millions of us who are unbanked.
Solution: Postal Banking
Many countries have a system that is known as "postal banking" in which people can open an account at their post office for basic services like writing and cashing checks, small savings accounts and can get small loans. The USPS could easily provide similar services here in the U.S., for low fees. This would help "unbanked" Americans escape the exploitation and fees of payday lenders and check-cashing services.
The U.S. used to have a Postal Savings Bank. This could be restored to serve the millions of the unbanked. There are USPS post offices located in every town. These post offices could have ATM machines, and/or people could go to the counter for simple banking transactions and to get a checkbook.
Senator Sanders has been promoting this idea for some time. In a 2014 Wall Street Journal op-ed on saving the USPS, Sanders wrote:
[T]he Postal Service should have the flexibility to provide new consumer products and services—a flexibility that was banned by Congress in 2006. It is now against the law for workers in post offices to notarize or make copies of documents; to cash checks; to deliver wine or beer; or to engage in e-commerce activities (like scanning physical mail into a PDF and sending it through e-mail, selling non-postal products on the Internet or offering a non-commercial version of Gmail).
Here's the full quote from Sanders' Fusion interview this week with Felix Salmon about postal banking:
I think that’s a great idea. In fact, I just spoke to a postal union this morning. I want to see our post office be reinvigorated. And one of the ways that I think we can help not only the U.S. Postal Service, but help a lot of low-income people—if you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it.
Here is Sanders talking about his plans for free college tuition and getting post offices to offer banking services on Jimmy Kimmel Live:
Joe Pinsker at the Atlantic writes about Sanders' plan, in "Bernie Sanders's Highly Sensible Plan to Turn Post Offices Into Banks":
In fact, Sanders’s idea is quite sensible. “Postal banking”—which just means that post offices run savings accounts, cash checks, and perform other basic financial services—is common in most of Asia and Europe, and only about 7 percent of the world’s national postal systems don’t offer some bank-like services. Postal banking is a really good way to reach people who haven’t had access to standard savings accounts. One estimate figures that more than 1 billion people have used post offices for making deposits.
The reason why this would be so useful in the U.S. is that somewhere between 20 and 40 percent of the population has to rely on check-cashing or payday-lending services, which in some places charge usurious rates that send people into spirals of recurring debt.
David Dayen has been writing about postal banking for some time. In "When the Bank Robs You" at In These Times, Dayen writes:
From 1911 to 1967, the post office did offer savings accounts, attracting millions who previously kept their money under the mattress. At its height in 1947, 4 million Americans held $3.4 billion in postal deposits. Baradaran calls it “the most successful experiment in financial inclusion in the United States” and thinks we’ve reached the moment to restart it.
Not only would a USPS bank reduce inequality by providing credit to millions while potentially saving them billions in fees, it would shore up the Postal Service’s finances and sustain post-office employment as a middle-class career. And it would eliminate payday lenders and check-cashing operators, interested only in skimming a hefty take for providing the financial services the middle and upper classes take for granted.
Mehrsa Maradaran calls postal banking a "public option" that would help "balance the scales" for Americans trying to live in our rigged economic system, in "If the U.S. Government Treated Poor People as Well as It Treats Banks":
In fact, postal banking was the largest and most successful experiment in financial inclusion in U.S. history and remains the primary tool for financial inclusion across the world. The basic idea of modern postal banking is a public bank offering a wide range of transaction services, including financial transactions, remittance, savings accounts, and small lending. These institutions would remain affordable because of economies of scale and because of the existing postal infrastructure in the U.S. Plus, in the absence of shareholders, they would not be driven to seek profits and could sell services at cost.
A public option in banking would balance the scales of government support for the banking industry and could potentially drive out the usurious fringe-lending sector, which profits from Americans’ financial woes. There are millions of individuals whose otherwise stable financial lives can be upended by one unexpected event that snags them in an otherwise temporary liquidity crunch.
Postal banking is an obvious no-brainer solution to two national problems. It helps millions of Americans, and it helps the USPS stay afloat at a time when corporate/conservative neoliberals argue that it should "make a profit" instead of serve the public.