Monday, February 3, 2014

Postal Banking's Got Game

Berkeley CA residents trying to save their historic Post Office. It's still up in the air.

When I lived in Japan in the late 80s, one thing I found strictly Japanese was postal banking (turns out it's popular around the world). It actually made for some trying trips to the post office, as those of us buying stamps (yes, we wrote paper letters home back in those days...) had to vie with the savers waiting to get cash or deposit their paychecks.

It never occurred to me that such a thing would fly in the American postal system until I read about it this morning over at Hullabaloo, which linked to this David Dayen piece suggesting that Barack Obama use his new-found magic pen to solve what has been for the longest time a national disgrace:
What’s the policy? Letting the U.S. Postal Service (USPS) offer basic banking services to customers, like savings accounts, debit cards and even simple loans. The idea has been kicked around policy circles for years, but now it has a crucial new adherent: the USPS Inspector General, who endorsed the initiative in a comprehensive white paper.
The Inspector General, who conducted the study with the help of a team of experts in international postal banking as well as a former executive from Merrill Lynch, correctly frames the proposal not as a challenge to mega-banks, but as a way to deliver needed amenities to the nearly 68 million Americans—over one-quarter of U.S. households—who have limited or no access to financial services. Instead of banks, these mostly low-income individuals use check-cashing stores, pawnshops, payday lenders, and other unscrupulous financial services providers who gouged their customers to the tune of $89 billion in interest and fees in 2012, according to the IG report. Post offices could deliver the same services at a 90 percent discount, saving the average underserved household over $2,000 a year and still providing the USPS with $8.9 billion in new annual profits, significantly improving its troubled balance sheet. The report calls simple financial services “the single best new opportunity for the posts to earn additional revenue.”
As America becomes more of a cashless society, more reliant on some level of financial services (try renting a car without a credit card), the 68 million under-banked are essentially forced into working with predatory businesses, without the kind of low-cost alternative the post office could provide. Banks don’t want these customers; if they did, they would actually make a play for their business. Large banks have closed branches in the very low-income communities with the largest percentages of unbanked Americans. In fact, banks find it more profitable to fund payday lenders that charge junk fees and outrageous interest—currently the subject of a Justice Department investigation—than actually take market share away from them.
Here's an actual problem waiting for a solution that's right under our noses. We can almost effortlessly bring banking to the poor and underserved while giving a serious smackdown to the predatory lenders that also overcharge poor and minorities to simply cash their paychecks. And not only will this help save our postal system from the slow death it's been undergoing these past few years, but it also can be done by executive order. So says Dayen:
It’s this point which, the Inspector General contends, would allow the USPS to potentially dispense banking services immediately, without Congressional approval. The Postal Accountability and Enhancement Act (PAEA) of 2006 put restrictions on offering new “non-postal” services. However, the report points out, “given that the Postal Service is already providing money orders and other types of non-bank financial services, it could explore options within its existing authority.”
Do it, Mr. President, if only to give us some delight in watching conservatives in Congress suddenly find their hair on fire.

Seriously, this is true progressive reform at its best. I very much hope it happens.

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