Postal Banking Is an Idea Whose Time Has Come (Again)

If you hear about the US Postal Service at all these days, it’s likely because of a failure. The Post Office continually posts significant operating losses, which are generally accompanied by news stories about the slow demise of the USPS. These stories rarely give you the full story, which is the fact that the USPS only posts losses because the Republican Congress of 2006 strapped the service with an impossible financial burden—a bizarre mandate demanding that the USPS pre-fund retiree health benefits for 75 years in the future. This is a burden that no other government agency (or, for that matter, private company) has ever had to carry, and it amounts to over five billion dollars a year in annual payments, an operating cost that no organization could bear. Also, it’s important to note that the USPS has not taken a penny of your tax dollars since 1982, and the service they provide is unparalleled: no private corporation could offer the network and consistency that the USPS offers.

Joe Pinkser at The Atlantic highlights one of Bernie Sanders’s best ideas—a way for the USPS to become even more useful while also helping the poorest Americans save a little money. Here’s what Sanders has to say about it:

If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it.

As Pinkser points out, this is not a crazy idea. Plenty of European countries provide banking by post—in fact, a vast majority of post offices around the world provide some sort of banking services—and too many Americans rely on predatory checks-cashed outlets to do their banking. Mehrsa Baradaran at Slate last year presented a wonderful case for postal banking: we’ve already done it in America, and it worked.

The bill eventually passed in 1910 and created what was called the United States Postal Savings System.* The interest on accounts was set by statute to a low 2.5 percent to avoid luring customers away from banks. The postmasters and supporting congressmen also called the postal banks “the poor man’s banks” to set bankers at ease. Accounts were capped at $100 deposits allowed per month and a total savings cap of $500—the limit was raised to $2,500 dollars in 1918.

This, quite simply, is a no-brainer. Roughly two out of every ten Americans are “underbanked,” which means they rely on high-fee check-cashing outlets to do their banking. The USPS would allow them to do their banking more affordably, and encourage modest savings accounts that would enable them to better their conditions. This is something many other nations do. Hell, it’s something America used to do. And its time has come again.