Banking on ways to save postal
service
Talk about killing two birds with one
stone; here’s an idea that can take down a whole flock.
It’s called postal banking, and it
could help rescue the Postal Service, make banks nicer to the little guy, raise
the national savings rate and cut the cost of financing the national
deficit.
This is not a new idea. A vast array of
nations from Germany to India offer their citizens financial services through
the post office. We do too, a little, by selling money orders and package
insurance. But we used to do much more.
From 1910 to 1967 Uncle Sam ran the
Postal Savings System. It paid 2 percent on deposits (which peaked at $3.4
billion in 1947) and reaped 2.5 percent by putting the money into local banks,
thus covering the cost of operations. Customers could save as little as 10 cents
at a time by filling a postal savings card with stamps and then turning it in
for credit.
Consider the possibilities. The Postal
Service is in financial trouble partly due to meddling by Congress, but also
because the digital revolution is driving down mail volume. Congress wants the
place run like a business, but won’t let the service set prices, close
money-losing outlets or otherwise be businesslike. The government, meanwhile,
backstops the for-profit banking system without charging for this valuable
service. These same banks treat low-income customers like pinatas, beating fees
out of them at every turn.
The postal banking alternative is old,
established and could easily work here. There are post offices all over America,
and they already handle lots of cash. Postal deposits could be invested in
Treasury securities for ironclad safety, and these new funds would likely reduce
Uncle Sam’s cost of borrowing, saving money for taxpayers. Instead of the
certificates used by the old Postal Savings System, depositors would get debit
cards.
A postal bank could make money in
several ways. Users could pay modest fees for checking and other services, and
the system could pay out less in interest than it earns on the Treasuries it
would buy.
Since the goal isn’t to drive banks out
of business, individual accounts could be capped at some appropriately modest
sum, and there would be no loans except to Washington. Even so, this new postal
competition should force banks to treat their smaller customers a little better
— while rescuing many poor Americans from the teeth of costly check-cashing
outlets and payday lenders.
Could postal banking be big enough to
make a dent in Postal Service deficits? Well, the Japanese postal bank has more
than $2 trillion in deposits, and the United States is nearly three times
as populous. It’s not inconceivable to imagine an American postal bank throwing
off an annual profit of $5 billion, which is what the Postal Service lost in its
last fiscal year (although losses seem to be
accelerating).
Besides, aiding the Postal Service is
the least of the plan’s virtues — and postal banking by itself can’t save the
system, which needs to change regardless. More important is that postal banking
would put the government once again on the side of encouraging thrift. People
with savings don’t need payday lenders, after all. Accumulating capital can help
them weather emergencies, start businesses and buy
homes.
A postal savings system would give
people a trusted place to save right in their own communities, without
outrageous fees or sales pitches for tricky products. Postal banking could take
its place alongside other cherished non-market institutions, such as Social
Security and public libraries, that help Americans help themselves. People love
their libraries. Why not let them bank on their Postal
Service?
• Daniel Akst is a columnist for
Newsd
