Your Post Office Now Wants to Be Your Bank

USPS is thinking about financial services — debit cards and small loans. But first, America’s banks would have to get on board, or at least out of the way.

Dozens of retired mailboxes sit in a parking lot at the U.S. Post Office sort center March 25, 2009 in San Francisco, California. Postmaster General John Potter told the House Oversight post office subcommittee that the U.S. Postal Service will run out of money this year unless they are permitted to cut mail delivery to five days a week and are able to implement changes in how they payout retiree health care. The Postal Service lost $2.8 million last year and expect the losses to increase this year.
National Journal
Catherine Hollander
Feb. 9, 2014, 9:16 a.m.

The post of­fice isn’t known as the most ef­fi­cient or re­li­able busi­ness in Amer­ica. It can’t run its op­er­a­tions at a profit, it’s got ser­i­ous fin­an­cial troubles, and just try mail­ing a pack­age on a Sat­urday without wait­ing in line for 30 minutes.

Now ima­gine re­ly­ing on this in­sti­tu­tion for your bank­ing needs, everything from load­ing up a deb­it card to tak­ing out a small per­son­al loan. It’s a hard sell, but one that pro­gress­ives and con­gres­sion­al Demo­crats are mak­ing as they search for a way to keep this Amer­ic­an in­sti­tu­tion run­ning.

The idea, most re­cently floated in a white pa­per by the U.S. Postal Ser­vice’s in­spect­or gen­er­al and sup­por­ted in the­ory by Sens. Eliza­beth War­ren and Bernie Sanders, es­tim­ates that the money-los­ing agency could make $8.9 bil­lion a year by of­fer­ing lim­ited bank­ing ser­vices to the tens of mil­lions of people who are not served by tra­di­tion­al banks. (These are people locked out of the cur­rent bank­ing sys­tem due to geo­graphy or re­l­at­ive poverty and who of­ten rely on pay­day lenders, pawn­shops, and title loans for their cash.)

The­or­et­ic­ally, the USPS could part­ner with banks, who would help it of­fer branded, re­load­able pre­paid cards; set up and man­age Web and mo­bile ac­cess to fin­an­cial ser­vices; ser­vice ac­counts and loans; and maybe even fund and hold the loans on their own bal­ance sheets. In re­turn for the banks’ par­ti­cip­a­tion, the USPS would of­fer its massive net­work of post of­fices, 38 per­cent of which are in ZIP codes that don’t have a bank, and its trust­worthy name. The banks could reap “sub­stan­tial rev­en­ue” through the ar­range­ment, the white pa­per pre­dicts.

A mar­riage made in heav­en? Hardly. The banks are not quite on board with the idea of al­low­ing the Postal Ser­vice to ex­pand in­to their realm.

Their stated con­cern is com­pet­i­tion, al­though Cam­den Fine, pres­id­ent of the In­de­pend­ent Com­munity Bankers of Amer­ica, says that might not be the deal break­er. “Have you ever stood in the lines at Christ­mas­time at a post of­fice?” he asked.

He in­stead points to the Postal Ser­vice’s dis­mal fin­an­cial situ­ation. Since 2007, the USPS has struggled migh­tily to stay afloat fin­an­cially. Con­gress is at least partly to blame for the agency’s fin­an­cial woes; le­gis­la­tion passed in 2006 re­quired the or­gan­iz­a­tion to rap­idly set aside money to “pre-fund” its re­tir­ee health plans. Also at fault is the fin­an­cial crisis, which hastened the coun­try’s shift to cheap­er or free di­git­al com­mu­nic­a­tion. The USPS has had a net loss for the past sev­en fisc­al years, most re­cently $5 bil­lion in 2013. In­solv­ency con­stantly threatens.

So Fine wor­ries mem­bers of his trade group might lose money, either as tax­pay­ers or bankers, if they paired up with the strug­gling Postal Ser­vice.

“Let’s say they went down that same dis­mal road of non-suc­cess they have had with the de­liv­ery of mail, then when they start rack­ing up losses. Who’s on the hook for those losses? It’s either go­ing to be the bank, or the tax­pay­ers, or both,” Fine said.

Now, banks cer­tainly have their own repu­ta­tion­al trouble and some re­cent his­tory with ow­ing their very ex­ist­ence to the U.S. tax­pay­er. Still, they say their squeam­ish­ness comes from their con­cern about giv­ing an en­tity some­how re­lated to the U.S. gov­ern­ment ac­cess to a piece of the fin­an­cial mar­ket. (The Postal Ser­vice has been self-sup­por­ted for dec­ades, al­though it has bor­rowed money from tax­pay­ers to make ends meet in re­cent years.) Think Fan­nie Mae and Fred­die Mac, the mort­gage gi­ants the gov­ern­ment had to save by tak­ing in­to con­ser­vat­or­ship.

“Giv­en the Postal Ser­vice’s unique gov­ern­ment­al status, its entry in­to the fin­an­cial ser­vices mar­ket would raise ser­i­ous un­fair com­pet­i­tion con­cerns with the po­ten­tial to al­low it to be­come the next Gov­ern­ment Sponsored En­ter­prise (GSE) in the broad based fin­an­cial ser­vices arena,” four in­dustry groups said, re­fer­ring to Fan­nie and Fred­die, in a re­cent let­ter to Sens. Tom Carp­er, D-Del., and Tom Coburn, R-Okla., the au­thors of a postal re­form bill. A gov­ern­ment-backed postal bank would be just as un­fair, they say.

The in­dustry is fight­ing to kill the Carp­er-Coburn pro­pos­al that would give USPS’s ex­pan­sion the best chance for leg­al sur­viv­al. If the in­dustry suc­ceeds, the Postal Ser­vice might still be able to go it alone, to a cer­tain ex­tent, by us­ing its cur­rent au­thor­ity to provide money or­ders and in­ter­na­tion­al money trans­fers. Ruth Gold­way, who acts as the Postal Ser­vice’s chief reg­u­lat­or as head of the Postal Reg­u­lat­ory Com­mis­sion, said she would be “de­lighted” if the USPS came to her with a pro­pos­al for postal bank­ing.

More com­plic­ated may be es­tab­lish­ing bank­ing ser­vices without in­dustry help. The Uni­ver­sal Postal Uni­on, the United Na­tions’ postal branch, sur­veyed coun­tries around the world that have postal bank­ing and found the busi­ness mod­els — the de­gree of in­volve­ment of the fin­an­cial ser­vices sec­tor — vary quite a bit.

Al­though bank­ing trade groups say they haven’t yet ruled out the pos­sib­il­ity of fu­ture part­ner­ships, here, with the bank­ing lobby still as power­ful as it is, the USPS might be on its own.

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