Banking at the Post Office: why the hell not?

If in fact 68 million U.S. adults live in unbanked households, why not let the US Postal Service provide basic financial services? Not, it seems to me, either checking accounts or loans – USPS isn’t really equipped to deal customers writting NSF checks or with loan underwriting and chasing defaulting borrowers, though it might allow real banks to use its buildings as branches – but it’s hard to see what goes wrong with allowing people to establish accounts into which they can deposit cash or checks and draw against them with debit cards. Those buildings – a third of them in ZIP codes without bank branches –  and the trust of the public, are two huge assets, and providing simple financial services to people whom the banks don’t want to serve seems like a good use of those assets. Other than interfering with glibertarian dreams of shutting down USPS entirely, I can’t see much of a downside.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact:

18 thoughts on “Banking at the Post Office: why the hell not?”

  1. They already do money orders and post office boxes, so I think it’s a natural growth for them to offer the equivalent of safe, low-interest checking accounts for people to use. In fact, they did do that for decades until the 1970s IIRC, and it wouldn’t be anything different than what Walmart does for people now.

    Of course, the banking industry is crying to high heaven over this, arguing that it’s unfair and will take away those heavily unbanked customers that they don’t have accounts with anyways. I’d be more worried if I was a check-cashing business, since customers could deposit their checks instead of paying a fee to cash them.

    1. Wal-Mart should be allowed to do banking too.

      The power of the financial services industry in this country is awesome and malevolent.

      1. I don’t see any reason why WalMart can’t have it’s own banking NOW. It’s really no different than banks having branches inside big box grocery stores.

          1. If you are libertarian-ally inclined, you can blame regulators for this one. Wal-Mart hasn’t been permitted to join the banking industry because of onerous regulatory requirements.

  2. I think the key questions could be “in what do they invest the deposits” (if they don’t make loans) and “will they make enough money to pay the bills somehow (there are a lot of compliance costs in banking).”

    1. Many other countries offer post office banking. The French postal service, for example provides a full range of basic banking services of very respectable quality.

      On the other hand, I would strongly object to any sort is “partnership” with private banks, for reasons too numerous and too obvious to mention.

    2. hook ’em up to the Fed to exchange dollars for 3 month tbills at the going rate, or have the USPS act as an agent for the Fed and let individuals have (very low interest rate, relatively low balance-no more than say $5K) accounts at the Fed accessed by debit cards

    3. Sam hit the nail on the head. The Japanese have a big post office savings bank, that ran into enormous trouble with its investment strategy. (IIRC, they were supposed to invest in “safe” things with no credit risk, so took enormous interest-rate risk and lost big.)
      OTOH, the reason the Japanese post office bank got into trouble is that it had to compete with commercial banks on interest. If you limited the PO Bank to interest-free payment products (and may selling Treasuries), this problem will be much smaller. Although it is still hard to make enough money to pay for system costs if you’re in a zero interest rate environment.

  3. The linked document talks about the “underserved”……….

    Yeah I guess.

    Given that it wasn’t until 2014 that anyone thought of creating a savings vehicle for the 47%. And it took an executive order to do it. I guess that counts as being “underserved.”

    The bottom line: When the median net worth of the American household is $66,000 and the median net worth of the 535 members of Congress is $960,000 (a factor of 14) you are talking two different worlds that have little overlap. A typical Congressman, no more understands the travails of a typical American family — nor represents them — than Romney could.

    What value does a Roth-like IRA that tops out at $15,ooo, have to a Senator who makes $174,000 a year (nearly triple the median net worth of the “underserved”)?

    All this goes double to the media mavens and their good-hair people with mics — the famous and the slick who don’t give a lick. That’s why there’s been very little conversation/celebration of MyRAs. The beltway people and the village aristocrats can no more understand the long term meaning of MyRAs, than they could understand what finding a $20 dollar bill in the street means to a 47-percenter. They are clueless to the space that the extra $20 makes…

    And that’s why it will take an executive order to empower the post office to play banker to the “underserved.”
    Look for that in 2045…

  4. I have long thought that Ireland and others had the right idea, and that the government should provide a way for even the poorest to have masonry safely handled. Heck, I’d go further and propose that every post office/bank should also serve as an outlet for any local credit union — that is, the credit unions would combine to staff a desk with an iPad where anyone (who needed more than what the USPS bank could offer) could quickly and easily establish a credit union account and take away the need for people to see payday lenders.

    The problem is, the post office is so sclerotic … They finally did the forever stamp, but still haven’t figured out that we also need a forever stamp for postcards and for second-ounce postage (my fantasy is that someone in power notices the problem and decrees into existence a “forever” second-ounce stamp and that it would also be allowed as the postage for postcards.

  5. Mark, I support this idea, but right now GOP’s (unconstitutional) plan is to try to destroy the US Postal Service.

  6. Just testing to see if I can comment here. I couldn’t register for Disqus last week but now I am on a different computer.

  7. Fifty-one national postal systems take deposits, including those in Japan, Germany, New Zealand and Switzerland. Financial services have become an economic salvation for many postal services facing challenges similar to those of the USPS.

  8. Lenin described how the giant bank monopolies in the early 20th century basically neutered postal offices of all financial abilities. I think if Wal Mart were allowed to do banking, it would be a nice backdoor for one of these Chinese banks to grab American assets. We all know that everything Wal Mart sells is made in sleazy SEZ slave labor conditions which they refuse to be resposible for, and while they continue to monopolize commodity production, Chinese banks have become the largest in the world. It’s no coincidence also that practically all the major banks, save for American Express, objected to Wal Marts venture into banking. Unlike the post offices at the turn of the last century, where the power of banks was challenged by a nascent competing power more tightly controlled by the state, today’s backlash against Wal Mart’s venture into private banking is a question of national finance capital, just how Lenin described. This is a dangerous move by Wal Mart and could lead to a third world war. The post offices offering similar services is likely a countermeasure by the same US national finance capitals who cannot compete against these Chinese behemoths who take over disguised as red blooded, beef eating Americans. And it’s funny how the libertarian there was all regulation this and regulation that about Wal Mart. Useful idiots I guess.

  9. According to wikipedia, the original US Postal deposits were re-deposited at commercial banks with a slightly higher interest rate. The difference defrayed the costs of operating the system.

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