The USPS is struggling. Could postal banking save it?October 28, 2020
Every American needs the United States Postal Service. Bills are a universal fact of life, and pay stubs too, even though modern technology means some workplaces can deposit their employees’ checks electronically. Still, 66% of adults in the U.S. use prescription drugs, and 20% of adults over 40 receive their medications through the mail. For these reasons and so many others, Americans love the USPS, and have made it a central rallying cry of the election after a summer spent watching it be hobbled at every turn.
Republicans have dumped resources into hamstringing the USPS since at least the 1990s, bent on privatizing the agency and getting their mitts on the public till. Given the Postal Service’s popularity, not to mention laws forbidding any persons other than USPS personnel from touching your mailbox, the conservative drive to undermine mail delivery makes no sense; people need mail, and in many U.S. towns, as well as far-flung rural areas, only the Postal Service can deliver it. Nevertheless, the Republican Party insists on passing laws to make this mission harder, most infamously 2006’s Postal Accountability and Enhancement Act (PAEA), a bill that famously tanked the Postal Service’s finances.
But the Postal Service’s value exceeds envelopes and packages. In many communities in the U.S., post offices fulfill crucial roles, including providing financial services for underserved communities. If the USPS is allowed to atrophy, thousands of people will lose much more than just mail.
Once upon a time — 110 years ago, to be specific — Congress set up the Postal Savings System, a law written to give Americans options for banking other than untrustworthy banks, to attract immigrants more comfortable with saving at post offices because that’s how they banked in their home countries, and to increase convenience. This system stayed in place for roughly half a century, until deposits dropped and the government responded by phasing the system out in the 1960s.
“Every other developed country in the world has postal banking.”
But fragments of the bygone USPS banking system remain intact. People can still walk into their local post office and purchase a money order or conduct certain wire transfers. They can also cash checks from the U.S. Treasury, which can include social security checks or tax refunds — all crucial tools for financial health for people who are unbanked or underbanked.
And now, there’s renewed energy to bring back postal banking in full force.
“Every other developed country in the world has postal banking,” the Campaign for Postal Banking says. “Postal banking isn’t a new idea,” notes California Democratic Rep. Ro Khanna’s Facebook page. “It’s worked before in America and expanded access to basic banking services.” New York Sen. Kirsten Gillibrand (D), in collaboration with Sen. Bernie Sanders (I-Vt.), put forth the Postal Banking Act in April of this year, highlighting postal banking’s positive impact on the government deficit during the Great Depression. The contemporary push for postal banking is gaining steam for two chief reasons: to save the USPS, and to help people living in urban and rural communities who lack easy access to banks.
Political activist and journalist Victoria Brownworth lives in one such community where the post office doubles as a financial institution. Her Philadelphia neighborhood is populated with shops and hoagie and pizza restaurants, plus check-cashing places “where people get payday loans, which generally speaking begin at 200% interest,” she tells Mic. Once a person falls into that abyss of debt, they can’t get out of it; they’re perpetually borrowing against their next paycheck. This is where the post office comes in. “You pay your bills, you get money orders,” Brownworth explains. “If you don’t have a fixed address, you have a post office box, and all of those things are central to a poor neighborhood.”
“The post office is really pivotal.”
Through the post office, these borrowers can avoid vulturous check-cashing joints and thus stay off the debt train. But even using the USPS to turn loose cash into a money order so you can pay rent means that you have to have the money to buy a money order. In this way, the post office’s currently available financial services make a pale replacement for full-fledged banking. Brownworth points out that the majority of America’s minimum wage workers are women (two-thirds, in fact), and that living off a meager paycheck becomes a jail sentence when you’re denied access to credit. “You don’t have a bank account because you can’t get one, because there are no banks in your neighborhood, and you can’t get credit, and you can’t build credit. How are you ever going to get a place to live without credit?” she says, outlining the chain of events.
“The post office is really pivotal,” Brownworth summarizes. “If you want to stay out of the whole debt cycle of the check-cashing places, you have to use the post office.”
Zach Raknerud, who is currently running to become the U.S. representative for North Dakota’s at-large congressional district (the sole congressional district for the entire state), similarly considers new calls for postal banking a response to the debt holes payday loans drag people into. “I think part of [postal banking] making a resurgence might have to do with the crony banking we’ve seen at the onset of the 21st century, with the Great Recession and the explosion in predatory payday lending,” he says. Whether in urban communities like Brownworth’s or rural communities like Raknerud’s, the dearth of choices for borrowers seeking small loans puts working-class and low-income Americans at risk of falling into a pit they won’t ever climb out of.
“The people of the United States deserve to have better options when it comes to short-term lending,” Raknerud adds, and the USPS could be that better option. The numbers bear this out: According to USPS Strategic Communications Specialist Steven Doherty, the agency “issued 80 million money orders, or about 270,000 each day” in 2019. (Mic submitted a FOIA request to determine which parts of the country buy the most money orders, but was told the Postal Service doesn’t store that information.)
Christopher W. Shaw, historian and author of Money, Power, and the People: The American Struggle to Make Banking Democratic, sees new-age postal banking as a net benefit for the country. “You have 9 million households that don’t have a bank account, and that makes life harder,” Shaw notes. “And you have 30,000 post offices that are in all sorts of communities across the nation. So there’s a need there, [and] there’s the ability to provide a service.”
Given that America has provided residents that service in the past, providing it today makes sense, though of course much has changed in the last century. For instance, a post offices operated as savings banks when postal banking originated, but checking accounts are more common now, electronic fund transfers are the norm, and the economy of today is an entirely different beast than the economy of the early 1900s. The question of what new postal banking might look like in 2020 is not easily answered given the scope of the changes required, but “the principle is the same,” Shaw says. “We’ve done this before. There’s a precedent.”
Precedent or not, obstacles litter the path to postal banking. For one, the USPS itself is hesitant to commit to full-on banking; their stated purpose on their website is explicitly “delivery, not banking.” Postal officials, Shaw says, “are pretty cautious around the issue.” He says they’re generally leery of endorsing or even thinking about making changes to the service that would fundamentally alter its character. But, he adds, “that doesn’t mean it can’t be done.”
Still, the USPS couldn’t just open up banks tomorrow even if it wanted to. Postal banking would have opponents in the form of competitors, too, crying “foul” over the government going into business against them. This, for obvious reasons, isn’t much of an argument against postal banking at all. “There’s a lot of people who they are not serving, or they’re not serving very well,” Shaw says of traditional banks. Considering how many people don’t have bank accounts — a full quarter of American households, by one estimate — and given that contemporary financial crises remain fresh in the American consciousness, the failures of private banking are apparent. As Shaw says: “There’s a need in the marketplace that is not being met by private business.” Opening up banking at the post office would mean the government stepping in to bridge the gap.
“It’s going to take messaging from union groups and USPS advocacy groups, all the way down to the grassroots.”
The greater hurdle is legislating a modern postal banking system into existence. “In order to get it up and running,” Shaw says, “you’d have to have a law that would be passed that would outline exactly what postal banking would look like,” whether it would be a savings bank or one where customers can have checking accounts. Worst of all, “Congress would have to pass it, and the president would have to sign it.” President Trump’s contempt for the USPS is well-documented, and has escalated over the matter of mail-in ballots, a new disinformation campaign of his that is seeing results. Nevermind that implementing postal banking would generate $9 billion in annual revenue, by Gillibrand and Sanders’s estimate, thus resolving one of the criticisms Republicans have about the agency (that it bleeds money). Trump has decreed the USPS a joke. Couple that with a Republican Senate with a severe social spending allergy, and getting legislation passed by the current government seems like a Sisyphean feat.
Of course, there’s an election next week, which means there’s a chance Joe Biden, who has promised to kibosh PAEA and give the USPS much-needed funds to stabilize its operations, will take the reins from Trump in January. There’s also a real possibility that the Democrats secure a majority in the Senate in addition to keeping control of the House.
Until then, though, the best option for making the dream of postal banking a reality is applying public pressure, combined with local leaders working to rally Americans behind new postal banking laws. “It’s going to take messaging from union groups and USPS advocacy groups, all the way down to the grassroots of representatives and candidates really making their constituents or potential constituents aware of the issue,” says Raknerud. He offers this food for thought: The USPS loses money every day delivering mail in North Dakota, where there’s no market incentive to deliver to farmers many miles away from USPS distribution centers. If only the Postal Service could come up with another service it could offer, one that would bring in revenue to make up the shortfall.
“When you frame it from that perspective — that postal banking could be critical to the future of the actual core USPS itself — that’s where people really get on board,” Raknerud says. The USPS is already essential. Expanding its function to once again include banking would make it unimpeachable.