Remembering the Pony Express by stampofapproval.com
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:
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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