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What We Could Do with a Postal Savings Bank: Infrastructure that Doesn't Cost Taxpayers a Dime

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The U.S. Postal Service (USPS) is the nation's second largest civilian employer after WalMart. Although successfully self-funded throughout its long history, 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 2006 congressional mandate that it prefund healthcare for its workers 75 years into the future. No other entity, public or private, has the burden of funding multiple generations of employees who have not yet even been born.

The Carper-Coburn bill (S. 1486) is the subject of congressional hearings this week. It threatens to make the situation worse, by eliminating Saturday mail service and door-to-door delivery and laying off more than 100,000 workers over several years.

The Postal Service Modernization Bills brought by Peter DeFazio and Bernie Sanders, on the other hand, would allow the post office to recapitalize itself by diversifying its range of services to meet unmet public needs.

Needs that the post office might diversify into include (1) funding the rebuilding of our crumbling national infrastructure; (2) servicing the massive market of the "unbanked" and "underbanked" who lack access to basic banking services; and (3) providing a safe place to save our money, in the face of Wall Street's new "bail in" policies for confiscating depositor funds. All these needs could be met at a stroke by some simple legislation authorizing the post office to revive the banking services it efficiently performed in the past.

Funding Infrastructure Tax-free

In a July 2013 article titled "Delivering A National Infrastructure Bank . . . through the Post Office," Frederic V. Rolando, president of the National Association of Letter Carriers, addressed the woeful state of US infrastructure. He noted that the idea of forming a national infrastructure bank (NIB) has had bipartisan congressional support over the past six years, with senators from both parties introducing bills for such a bank:

"An NIB would provide a means to channel public funds into regional and national projects identified by political and community leaders across the country to keep the economy healthy. It could issue bonds, back public-private partnerships and guarantee long-term, low-interest loans to states and investment groups willing to rebuild our schools, hospitals, airports and energy grids. An NIB with $10 billion in capital could leverage hundreds of billions in investments."

What has blocked these bills is opposition to using tax money for the purpose. But Rolando asks:

"[W]hat if we set up the NIB without using taxpayer funds? What if we allowed Americans to open savings accounts in the nation's post offices and directed those funds into national infrastructure bonds that would earn interest for depositors and fund job-creating projects to replace and modernize our crumbling infrastructure?

"A post office bank . . . would not offer commercial loans or mortgages. But it could serve the unbanked and fund infrastructure projects selected by a non-partisan NIB."  

The Unbanked and Underbanked: A Massive Untapped Market

The "unbanked" are not a small segment of the population. In a 2011 survey, the unbanked and underbanked included about one in four households.  Without access to conventional financial services, people turn to an expensive alternative banking market of bill-pay, prepaid debit cards, check cashing services, and payday loans.  They pay excessive fees and are susceptible to high-cost predatory lenders.

Globally, postal banks are major contributors to financial inclusion. Catering to this underserved population is a revenue-generator for the post office while saving the underbanked large sums in fees. Worldwide, according to the Universal Postal Union , 1 billion people now use the postal sector for savings and deposit accounts, and more than 1.5 billion take advantage of basic transactional services through the post. According to a Discussion Paper of the United Nations Department of Economic and Social Affairs:

"The essential characteristic distinguishing postal financial services from the private banking sector is the obligation and capacity of the postal system to serve the entire spectrum of the national population, unlike conventional private banks which allocate their institutional resources to service the sectors of the population they deem most profitable." 

Expanding to include postal financial services has been crucial in many countries to maintaining the profitability of their postal network.   Maintaining post offices in some rural or low-income areas can be a losing proposition, so the postal service often cross-subsidizes with other activities to maintain its universal network.  Public postal banks are profitable because their market is large and their costs are low.  The infrastructure is already built and available, advertising costs are minimal, and government-owned banks do not reward their management with extravagant bonuses or commissions that drain profits away.  Profits return to the government and the people. 

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Ellen Brown is an attorney, president of the Public Banking Institute, author of 12 books including WEB OF DEBT and THE PUBLIC BANK SOLUTION, and a candidate for California treasurer running on a state bank platform. See (more...)
 
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A postal savings bank would be a much easier sel... by Joseph Danison on Tuesday, Sep 24, 2013 at 7:41:39 AM
Fine observations, Joseph.  I have to disagre... by Ernie Messerschmidt on Tuesday, Sep 24, 2013 at 10:29:47 AM
I think we've got Putin to thank for stopping the ... by Joseph Danison on Tuesday, Sep 24, 2013 at 6:40:44 PM
This is obviously a no-brainer improvement.  ... by Robert James on Tuesday, Sep 24, 2013 at 9:52:10 AM
Another brilliant piece by one of our best public ... by Cliff Arnebeck on Tuesday, Sep 24, 2013 at 10:41:36 AM
Sadly, it seems that there is an inverse ratio bet... by Brian Cooney on Tuesday, Sep 24, 2013 at 11:58:39 AM
Would it not be very dangerous to place hopes on a... by Paul Repstock on Tuesday, Sep 24, 2013 at 12:15:35 PM
The "they" who imposed the 75 year funding require... by David McCorquodale on Tuesday, Sep 24, 2013 at 12:42:35 PM
I think this is a FANTASTIC idea.  when i use... by laurie steele on Tuesday, Sep 24, 2013 at 9:32:55 PM
This article is very interesting.  I believe,... by Sue Peters on Tuesday, Sep 24, 2013 at 9:33:18 PM
True enough! But look what happened to Kucinich's ... by Joseph Danison on Tuesday, Sep 24, 2013 at 10:13:08 PM
I have been advocating the establishment of Post O... by Kevin Anthony Stoda on Wednesday, Sep 25, 2013 at 9:07:49 AM
An idea that has come, and come again.  Thank... by Ida Garza on Wednesday, Sep 25, 2013 at 9:28:02 AM