The War on the Post Office
U.S. Postal Service truck. (Alexander Marks / Wikimedia)
The U.S. banking establishment has been at war with the post office since at
least 1910, when the Postal Savings Bank Act established a public savings
alternative to a private banking system that had crashed the economy in the
Bank Panic of 1907. The American Bankers Association was quick to respond,
forming a Special Committee on Postal Savings Legislation to block any
extension of the new service. According to a September 2017 article in The
Journal of Social History titled " 'Banks of the People': The Life and Death
of the U.S. Postal Savings System," the banking fraternity would maintain
its enmity toward the government savings bank for the next 50 years.
As far back as the late 19th century, support for postal savings had united
a nationwide coalition of workers and farmers who believed that government
policy should prioritize their welfare over private business interests.
Advocates noted that most of the civilized nations of the world maintained
postal savings banks, providing depositors with a safe haven against
repeated financial panics and bank failures. Today, postal banks that are
wholly or majority owned by government are still run successfully, not just
in developing countries, but in France, Switzerland, Israel, Korea, India,
New Zealand, Japan, China and other industrialized nations.
The U.S. Postal Savings System came into its own during the banking crisis
of the early 1930s, when it became the national alternative to a private
banking system that people could not trust. Demands increased to expand its
services to include affordable loans. Alarmed bankers called it the "Postal
Savings Menace" and warned that it could result in the destruction of the
entire private banking system.
Rather than expanding the Postal Savings System, the response of President
Franklin Roosevelt was to buttress the private banking system with public
guarantees, including FDIC deposit insurance. That put private banks in the
enviable position of being able to keep their profits while their losses
were covered by the government. Deposit insurance, along with a statutory
cap on the interest paid on postal savings, caused postal banking to lose
its edge. In 1957, under President Eisenhower, the head of the government
bureau responsible for the Postal Savings System called for its abolition,
arguing that "it is desirable that the government withdraw from competitive
private business at every point." Legislation to liquidate the Postal
Savings System was passed in 1966. One influential right-wing commentator,
celebrating an ideological victory, said: "It is even conceivable that we
might transfer post offices to private hands altogether."
Targeted for Takedown
The push for privatization of the U.S. Postal Service has continued to the
present. The USPS is the nation's second-largest civilian employer after
Walmart and has been successfully self-funded without taxpayer support
throughout its long history, but it is currently struggling to stay afloat.
This is not, as sometimes asserted, because it has been made obsolete by the
internet. In fact, the post office has gotten more business from internet
orders than it has lost to electronic email.
What has pushed the USPS into insolvency is an oppressive congressional
mandate that was included almost as a footnote in the Postal Accountability
and Enhancement Act of 2006 (PAEA), which requires the USPS to prefund
health care for its workers 75 years into the future. No other entity,
public or private, has the burden of funding multiple generations of
employees yet unborn. The prefunding mandate is so blatantly unreasonable as
to raise suspicions that the nation's largest publicly owned industry has
been intentionally targeted for takedown.
What has saved the post office for the time being is the large increase in
its package deliveries for Amazon and other internet sellers. But as The
Nation notes in a February 2018 article by Jake Bittle titled
"Postal-Service Workers Are Shouldering the Burden for Amazon," this
onslaught of new business is a mixed blessing. Postal workers welcome the
work, but packages are much harder to deliver than letters, and management
has not stepped up its hiring to relieve the increased stress on carriers or
upgraded their antiquated trucks. The USPS simply does not have the funds.
Bittle observes that for decades, Republicans have painted the USPS as a
prime example of government inefficiency. But there is no reason for it to
be struggling since it has successfully sustained itself with postal revenue
for two centuries. What has fueled conservative arguments that it should be
privatized is the manufactured crisis created by the PAEA. Unless that
regulation can be repealed, the USPS may not survive without another source
of funding, since Amazon is now expanding its own delivery service rather
than continuing to rely on the post office. Postal banking could fill the
gap, but the USPS has been hamstrung by the PAEA, which allows it to perform
only postal services such as delivery of letters and packages and "other
functions ancillary thereto," including money orders, international
transfers and gift cards.
Renewing the Postal Banking Push
Meanwhile, the need for postal banking is present and growing. According to
the Campaign for Postal Banking, nearly 28 percent of U.S. households are
underserved by traditional banks. Over 4 million workers without a bank
account receive pay on a payroll card and spend $40-$50 per month on ATM
fees just to access their pay. The average underserved household spends
$2,412 annually-nearly 10 percent of gross income-in fees and interest for
non-bank financial services. More than 30,000 post offices peppered across
the country could service these needs.
The push to revive postal banking picked up after January 2014, when the
USPS inspector general released a white paper making the case for postal
banks and arguing that many financial services could be introduced without
new congressional action. The cause was also taken up by Sens. Elizabeth
Warren and Bernie Sanders, and polling showed that it had popular support.
In a January 2018 article in Slate, "Bank of America Just Reminded Us of Why
We Need Postal Banking," Jordan Weissman observes that Bank of America has
now ended the free checking service on which lower-income depositors have
long relied. He cites a Change.org petition protesting the move, which notes
that Bank of America was one of the sole remaining brick-and-mortar banks
offering free checking accounts to its customers. "Bank of America was known
to care for both their high income and low-income customers," said the
petition. "That is what made Bank of America different." But Weissman is
more skeptical, writing:
"
What this news mostly shows is that we shouldn't rely on for-profit
financial institutions to provide basic, essential services to the needy. We
should rely on the post office.
In spite of what some of its customers may have thought, Bank of America
never cared very much about its poorer depositors. That's because banks
don't care about people. They care about profits. And lower-middle class
households who have trouble maintaining a minimum balance in a checking
account are, by and large, not very profitable customers, unless they're
paying out the nose in overdraft fees.
Those modest accounts won't be hugely profitable for the Postal Service
either, but postal banking can be profitable through economies of scale and
the elimination of profit-taking middlemen, as postal banks globally have
demonstrated. The USPS could also act immediately to expand and enhance
certain banking products and services within its existing mandate, without
additional legislation. According to the Campaign for Postal Banking, these
services include international and domestic money transfers, bill pay,
general-purpose reloadable postal cards, check-cashing, ATMs, savings
services and partnerships with government agencies to provide payments of
government benefits and other services.
A more lucrative source of postal revenue was also suggested by the
inspector general: The USPS could expand into retail lending for underserved
sectors of the economy, replacing the usurious payday loans that can wipe
out the paychecks of the underbanked. To critics who say that government
cannot be trusted to run a lending business efficiently, advocates need only
point to China. According to Peter Pham in a March 2018 article for Forbes
titled "Who's Winning the War for China's Banking Sector?":
"
One of the largest retail banks is the Postal Savings Bank of China. In 2016
retail banking accounted for 70 percent of this bank's service package.
Counting about 40,000 branches and servicing more than 500 million separate
clients, the Postal Savings Bank's asset quality is among the best.
Moreover, it has significantly more growth potential than other Chinese
retail banks.
Neither foreign banks nor private domestic retail banks can compete with
this very successful Chinese banking giant, which is majority owned by the
government. And that may be the real reason for the suppression of postal
banking in the United States. Bankers continue to fear that postal banks
could replace them with a public option-one that is safer, more efficient,
more stable and more trusted than the private financial institutions that
have repeatedly triggered panics and bank failures, with more predicted on
the horizon.
Ellen Brown
Ellen Brown is an attorney, chairman of the Public Banking Institute, and
author of twelve books including "Web of Debt" and "The Public Bank
Solution."
Ellen Brown