Policy Idea: Return to US Post Office Banking

[james.hendrickson]

Here is another policy idea that's been getting some traction.

What does the SA forums community think about having the post office go back to Post Office Banking?

Basically the idea is: Postal Banking is basically provision of financial services by the Postal Service. This would be stuff like,non-profit and low-cost, consumer-driven products and services that could range from check cashing to bill payment to savings accounts to small-dollar loans. When the banking was first introduced in the 1960s, there were limits on balances and interest rates paid.

The advantages are:

1. Post offices are located in underserved rural and urban communities. These same communities often do have access to small dollar loans at competitive interest rates. In many cases the unbanked are also in these same neighborhoods and don't have access to cost effective banking services.

2. The Post Office badly needs a new source of revenue to remain solvent.

3. Banks such as Wells Fargo have recently been aggressive in their misconduct against consumers.

In the interests of a fair and full debate on this, the Federalist hates the idea. Here is the case for it, laid out in more detail.

[Fishindude77]

The feds need to stay out of the banking business, they are already in it on the regulatory end.
They can't keep the postal service in the black, what makes anyone think they would do any better running banking?

Anytime the government gets involved in something like this they take business and income away from private sector companies and personnel.

[james.hendrickson]

Fishindude77

Good points.

Two thoughts in response. First, the constitution does authorize the creation of post offices, so its not like a new bureaucracy created out of whole cloth.

In fact, Article I, Section 8, Clause 7 of the United States Constitution, empowers Congress "To establish Post Offices and Post Roads". So, unlike the CFPB its not exactly new or more government. Its also seems like it doesn't limit freedom at all.

Second, what about when markets fail?

A lot of the big banks aren't exactly consumer friendly these days.The recent Wells Fargo scandal suggests big finance institutions are often willing to willfully violate Federal law to maximize profit. Also, the rural and urban poor don't have a lot of money, so they're not generally profitable to provide services to.

I agree with you that in general free markets allocate capital better than planned economies - there is no question about that.

But, if free markets were the answer to solving the problems of the rural and inner city unbanked, they would have solved the problem by now.

[disneysteve]

Fishindude77

But, if free markets were the answer to solving the problems of the rural and inner city unbanked, they would have solved the problem by now.

A lot of folks who are unbanked are that way by choice. They don't trust banks. They don't have valid ID. They don't want their financial transactions tracked in any way. You could open a bank on every corner with no fees and no minimums and many of them would still choose to be unbanked.

[bjl584]

I think this would drive the Post Office more into the red than they already are.
Brick and Mortar banking is strained enough.
We probably don't need more of it

[Smallsteps]

Here is another policy idea that's been getting some traction.

What does the SA forums community think about having the post office go back to Post Office Banking?

Basically the idea is: Postal Banking is basically provision of financial services by the Postal Service. This would be stuff like,non-profit and low-cost, consumer-driven products and services that could range from check cashing to bill payment to savings accounts to small-dollar loans. When the banking was first introduced in the 1960s, there were limits on balances and interest rates paid.

The advantages are:

1. Post offices are located in underserved rural and urban communities. These same communities often do have access to small dollar loans at competitive interest rates. In many cases the unbanked are also in these same neighborhoods and don't have access to cost effective banking services.

2. The Post Office badly needs a new source of revenue to remain solvent.

3. Banks such as Wells Fargo have recently been aggressive in their misconduct against consumers.

In the interests of a fair and full debate on this, the Federalist hates the idea. Here is the case for it, laid out in more detail.

Most paychecks and most government checks including SSN are direct deposit many i knew had to open an account when that happened ..... how old is the data they used for this?

Many companies provide similar services like Walmart and even Kroger has bill pay and check cashing. Lots of players in that market like Green Dot etc. In order to compete the ads would eat any revenue immediately.

Many are un- banked for various different reasons not because they did not have a building to go to. Last time I was in a post office i did not find the customer service or wait time to encourage a return will that be fixed for their bank?

I agree that post office needs a new revenue source but seriously do not think this is the answer. Maybe 10 plus years ago but the ship has sailed on this now. look up how many banks have opened or changed names to get into the online market.

I feel some of the aggressive or sketchy customer tactics ( Wells Fargo) are due to increased competition and lower revenue for those in the banking world now. How does opening banks in PO help that?

[ua_guy]

Not interested in that idea at all. Agreed that the fed should not get involved in personal banking just as the fed should not be propping up individual stocks right now, but that's a different discussion.

Maybe look at undoing the PAEA passed by the republican congress in 2006. No other government or private agency is required to establish a 75 year prefund for health/retirement benefits for future retirees. Why can't they be integrated into Medicare? Lots and lots of reform is needed, and it probably starts with taking another look at many of the stifling measures passed to limit reform and solvency.