Postal banking is harmful and unnecessary | Columns
On October 4, three days after the Postal Service implemented degraded standards for first class mail, ensuring delivery will be slower than in the 1970s, it announced it was embarking on a new business. : check cashing. The experimental service takes place in four cities: Washington, Baltimore, the Bronx and Falls Church, Virginia.
USPS has $ 188 billion in unpaid debts and long-term liabilities, chronic annual losses of $ 9 billion, and has defaulted over $ 45 billion in pension and health care contributions since 2011. Yet, he’s flirting with diving into – yes, wait for that – the bank.
The main US progressives – Senators Bernie Sanders and Kirsten Gillibrand, as well as Representative Alexandria Ocasio-Cortez – are pushing hard enough for postal banking. Through the country’s more than 34,000 post offices, they want to deliver sprawling new government programs.
The central argument for postal banking is that millions of Americans are unbanked and exploited by payday loan companies and related businesses that charge high fees for check cashing and other services. . Unbanked means not having a checking or savings account at a bank or credit union.
While all exploitation of the poor is despicable, the numbers just don’t show that being unbanked is a widespread crisis, or that the USPS getting into this business is the best way to address the issue under -jacent.
A 2020 report from the Federal Deposit Insurance Corporation found that 5.4% of U.S. households (roughly 7.1 million households) were unbanked. This is the lowest level since the start of these studies, with a significant drop from 8.2% in 2011.
The FDIC study found that 56.2% of unbanked people were not at all interested in having a bank account, while only 24.8% were very or somewhat interested in a bank account.
And the unbanked have profitable options. For example, Walmart charges a maximum fee of $ 4 for checks up to $ 1,000, with funds put on a card, and up to three checks per day cashed. As part of the USPS pilot program, it charges $ 5.95 to cash checks up to only $ 500 and puts the funds on a card.
The mission and purpose of the USPS for the past 245 years has been to deliver the mail. It is the only entity that can perform this essential public service. Even in the Internet age, mail remains important, with 50 billion first-class mails sent each year. Still, the delivery standard for 39% of first-class mail has been extended by at least one day, effective October 1.
A critical lesson from the USPS over the past 15 years is that when it strays from its unique public and historical duty, mail delivery suffers. This is confirmed by USPS ‘focus on increasing parcel delivery over the past 15 years, a competitive product for which customers have many alternatives.
Today, parcels represent only 6% of the total volume, but the focus on growing this business has resulted in a double reduction in mail standards since 2014 and has contributed to the financial difficulties of the USPS.
Postal banking is much further removed from the USPS ‘core business of managing logistics and delivering mail.
Soon there will be aggressive pressure for the USPS to open savings accounts. Not far behind will be applications for low interest credit cards, mortgages and auto loans. The goal of the progressives is to make the USPS a gigantic government lender and change the bank as we know it.
This raises many questions. Will USPS offer Venmo-like payment options? Accept Bitcoin for payment? How much depositor and customer data could be stolen by hackers?
Banking technology is evolving rapidly and is essential to today’s banking services. USPS does not have the funds to become a full scale banking business. And taxpayers shouldn’t foot the bill for this experience or be the safety net of the USPS ‘financial service losses.
A 2018 Treasury Department task force report on the USPS was correct when it said, “Given the USPS ‘narrow expertise and limited capital, expansion into areas where the USPS does not have a comparative advantage or where a balance sheet risk could arise, such as postal banking, should not be pursued.
USPS falters in its critical mission: rapid mail delivery. Postal banking is diverting attention from this mission and will create even more staggering financial losses for the USPS, while doing little or no good.
Paul Steidler is a senior research fellow at the Lexington Institute, a public policy think tank in Arlington, Virginia.