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Could Post Offices Become Public Banks?

The U.S. Postal Service is floundering—2013 was the seventh year in a row to report a net loss, at a whopping $5 billion—and  nobody is quite sure how to fix it. Go Private? Close branches? Deliver Mail only four days a week? Ideas are being thrown around but little progress has been made in improving the troubled agency.

But last week, the office of the Inspector General of the U.S. Postal Service released a report with an out-of-the-box suggestion that would produce $8.9 billion in new annual profits: Turning the Post Office into a bank, with savings accounts, loans and debit cards. Furthermore, it would greatly benefit the poor, who lack banking options and are often gouged by predatory financial services.

The idea has been floated before but with official backing from the Inspector General it has a higher degree of credibility and plausibility. Add in the fact that it wouldn’t require Congressional approval, only an executive order from the President, and maybe the out-there proposal could actually become a reality.

Still think the idea sounds crazy? Consider this: The Post Office already was a bank. From 1911-1967, savings accounts were offered with 2 percent interest, ending because of competition from private banks with higher interest rates. The post office still provides money orders.

The report, titled “Providing Non-Bank Financial Services for the Underserved,” suggests expanding beyond money orders to other “non-bank financial services,” including small loans and reloadable pre-paid cards similar to debit cards. This would greatly benefit the poor, who spend a disproportionate amount on banking because they are often forced to use predatory, high-interest services like payday lenders, whose fees equal, on average, a 391 percent annual interest rate. According to the IG, “the average underserved household has an annual income of about $25,500 and spends about $2,412 of that just on alternative financial services, fees and interest.”

Post Offices, furthermore, are well-positioned to help people because of their presence in lower-income areas. The report says that “93 percent of the bank branch closings since late 2008 have been in ZIP Codes with below national median household income levels.” More than half of post offices are in ZIP Codes with zero or one bank branch. “There is a clear market need for innovative financial products, and millions of families would benefit from more affordable solutions,” it says. “The Postal Service could be exactly what they are looking for.”

The report is a refreshing example of creative thinking in the Inspector General community. Innovative ideas- that are actually carried out- are exactly what we need to solve our nation’s challenging problems.

By: Avery Kleinman
Beth Daley Impact Fellow, POGO

Avery Kleinman Avery Kleinman is the Beth Daley Impact Fellow for the Project On Government Oversight.

Topics: Government Accountability

Related Content: Inspector General Oversight

Authors: Avery Kleinman

Submitted by Larry at: February 9, 2014
This has been and is done in Germany! No reason at all not to do it here.
Submitted by km at: February 9, 2014
Anything to save the post office, which has been MUCH maligned, and never should have been forced into a "profit" orientation. Remember the motto - neither rain nor sleet nor snow...... It's a big country, and the USPS prices are so AFFORDABLE compared to the private package services, it's just a no brainer why we 1) need them, and 2) should allow them to have other sources of revenue. And 3) reverse the punishing one time funding of the retirement liability that I believe was what crippled the Service in the first place. Plus 4), charge junk mail a real rate. It will either go away, or it will generate revenue, either way, the USPS will beneifit!
Submitted by Tom at: February 9, 2014
Sounds like a great idea! Otherwise,I think the Post Office will continue to become increasingly an anachronism The vast majority of mail I get is junk mail which is probably the case for most Americans.
Submitted by texaca at: February 9, 2014
I like the Idea... just watch the Corporatocracy and MEGA-Banks weigh in on this idea, and watch all the Fools and Sale Outs in Congress decide, or in this case Stall and Waffle to no end, to try to kill this Idea..
Submitted by Ed at: February 9, 2014
Ms. Kleinman , the Postal Service isn't losing money for lack of revenue , it's losing money because Bush made them Pre-fund retirement for 75 yrs. into the future , and do it in 10 yrs. Among other free services the Government imposes on them . You do it a disservice by just grazing the surface of their financial problems . thompson_ed@comcast.net
Submitted by Paul Grajnert at: February 9, 2014
Great idea. I could invest my money with the people who stand behind my money. Could they also become centers where the people can receive other services?
Submitted by Bob at: February 9, 2014
The USPS is financially burdened by onerous funding expenses foisted on them by political coordination between politicians and corporations like Fedex and UPS to minimize it and shift a valuable service to the private sector.It's a great idea, but Big Business and their political flunkies will fight fiercely to stop it.
Submitted by Maria Celia at: February 9, 2014
This will help but I believe there should be a protection order for the Postal office and also for the peoples insurance accounts. I see this a good Idea people wouldn't have to go so far and they can pay their bills at the sametime receive their checks and send their mail. Three or more things done at once.But done under the USA order approval. Not by individual owners.But by the federal State.2-9-2014
Submitted by S Trinker at: February 9, 2014
Great Idea. The branches exist and deposits wouldn't be used as gambling chips as they are now on Wall Street. I've worked in banking for the big guys for 30 years. This is a plan that makes a lot of sense.
Submitted by Scap at: February 8, 2014
The Postal credit union flourished for many years until banks drove it out of business.
Submitted by Citizen at: February 8, 2014
No way !!
Submitted by Anonymous at: February 8, 2014
Great idea! Other countries have postal savings accounts--why not us?
Submitted by Zenda at: February 8, 2014
Dear Avery, The PO would be fine if Congress weren't trying to privatize it. Facts: the PO has taken no tax dollars since 1971; in 2006 Congress passed and act to make the PO pre pay 75 years of heath benefits for their employees which makes the PO go $5.5 billion in arrears BECAUSE OF THE MANDATE!!; The founders put the establishment of the PO in the Constitution and they didn't say it had to be a profit center. I AM TIRED OF THE NEGATIVITY ABOUT THE PO especially when it comes from Progressive groups I like. The bank idea is a good one but I doubt the banking and investment folks will let it happen. They really don't like competition and they own a lot of legislators.
Submitted by melinda at: February 8, 2014
This does sound like a good idea! Did the post office sell US savings bonds at some time in the past, maybe during WWII?
Submitted by Yes at: February 8, 2014
This is a very good idea! Let's do it !!!
Submitted by mssalaam at: February 8, 2014
this is a great idea. before dodd/frank jelled, i inquired about the set up for a poor peoples' mortgage company to target those in distressed areas subject to fluctuations in job market, layoffs, lack of access to capital. that would solve a lot of problems re mortgages ownership, co-ops, reit(s). glad to hear it. keep in touch.
Submitted by SirJohn at: February 8, 2014
And while we're waiting for the Post Office to print their deposit and withdrawal slips (a really good idea!) maybe they could start providing government-issued photo IDs to the millions of citizens who will otherwise be disenfranchised. All it will take is an executive order from the president.
Submitted by Gene at: February 8, 2014
Would they continue delivery service? That is also still a help to the under served and poor communities.
Submitted by Marilyn at: February 8, 2014
The idea sounds good of making post offices public banks to serve poor people.
Submitted by G-pa J at: February 8, 2014
this idea is worth considering. one potential pitfall is that it could create a terrible bottleneck if the financial services teller line was mixed in with the postal services line, which can be frustratingly long at high volume times.
Submitted by sandy at: February 8, 2014
I think this is a brilliant idea. Hopefully it will rid our country of check cashing stores that keep people in debt.
Submitted by presentasagift at: February 8, 2014
Additionally, instead of subsidizing the well-developed oil and gas industry, the federal government could support solar PV on every PO rooftop, promoting the use of renewable energy. The meter showing the sun's effect would be visible to all patrons, particularly the poor who initially suffer most from the climate change exacerbated by fossil fuels.
Submitted by Elizabeth Baker at: February 8, 2014
I think this is a GREAT idea! How can we move it forward?
Submitted by Rosey at: February 8, 2014
Great idea and that it doesn't require approval from the dysfunctional congress makes it viable.
Submitted by Gene Brody at: February 8, 2014
This sounds like a REALLY good idea.
Submitted by kleptoghost at: February 8, 2014
Great idea, Ah but the banks and predatory lenders would NEVER let this happen.
Submitted by John H at: February 8, 2014
The Post Office provided these services when I was growing up back in the '50s. There was little competition with banks because local banks provided services to the public. Now the large banks no longer serve the poor and working classes.
Submitted by Steve at: February 8, 2014
When do we sign a petition urging Obama to act on this!
Submitted by mk at: February 8, 2014
Please remember that it is not the USPS fault that they are floundering. In 2006 congress passed a useless law that requires them to pre-fund 75 years of retirement benefits, and they have to do it within ten years. Find me another agency or company that is forced to do this. Darrell Issa is a real fan of this law. He wants the Post Office privatized. I would much prefer to have the postal employee handle my banking, than to have Staples employees handle my mail!
Submitted by silver at: February 8, 2014
Good idea!
Submitted by Silver Fox at: February 8, 2014
It worked the first time it was done.
Submitted by harveyt at: February 8, 2014
postal savings came about because immigrants didn't trust banks, but the p.o.just put the mooney in regular banks. the p.o is broke because a 2006 law requies the p.o to pay benefits fifty years in advance, so they're forced to pay for employees who have not yet been born
Submitted by Anonymous at: February 8, 2014
This makes absolute sense. It is inexcusable that we allow the continued victimization of our poorest citizens by predatory payday lenders...
Submitted by Catmom at: February 8, 2014
We do know how to fix it! The first step is cancelling the prefunding of retirement for future employees yet unborn. That done, the USPS would be in the black. Sen. Warren suggests adding back banking services (discontinued in 1967). Don't believe everything the Inspector General tells you.
Submitted by Ron at: February 8, 2014
This should help the USPS, which has been treated unfairly by Congress, although the House will possibly viscerally object to it. After all, if instituted by executive order, strike one. If it helps postal workers/unions, strike two. If it gives the poor a chance, strike three. But let's try it, ready to combat the usual troglodytes
Submitted by Grandma Beverly at: February 8, 2014
Great idea! Would they hire more people so the lines would not be increased during peak times?
Submitted by aBigSupporter at: February 8, 2014
This would generate needed for the too-big-to-fail banks, perhaps reducing them to a size that will allow bank officers to go to prison for fraud and other crimes, and fight back against the libertarians and entrepreneurs trying to close, privatize and sell off post offices built with public funds!
Submitted by wilgilb at: February 8, 2014
Very interesting idea. I think the gov't wants to sell the post office to Fedex at a bargain price.
Submitted by g_mom at: February 8, 2014
This is a great idea. We need to send the President e_mail of our support of his signing an executive order for this idea.
Submitted by JohnnyTheRod at: February 8, 2014
The USPS needs to start charging commercial mailings the same rate as they charge the citizenry, as those are the bulk of mail being delivered! If they did that, they wouldn't be in financial trouble!!
Submitted by mactheknife at: February 8, 2014
It has been dumb to run rural and suburban homes on a daily basis three days a week would be enough, only business need 5 day delivery and many of them don't actually need it.
Submitted by Dave at: February 8, 2014
This is a great idea. The congress should also end that rididulous poison pill law requiring the post office to fund it's retirement 75 years in advance. A calculated and covert move to destroy unions and continue to compress wages.

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