New York Democrat Rep. Alexandria Ocasio-Cortez and Sen. Bernie Sanders are pushing a proposal known as postal banking – a system whereby the Post Office would be authorized to provide financial services.
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In legislation unveiled last week, which also aims to cap credit card interest rates at 15 percent, the pair of self-identified Democratic Socialists said postal banking could provide relief to low-income Americans.
“Post offices exist in almost every community in our country,” Sanders wrote in a blog post. “There are more than 31,000 retail post offices in this country. An important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services.”
Some of the proposed services a postal banking system could offer include low-interest loans, checking and savings accounts, debit cards, check cashing, bill payment, ATM services, online banking services and electronic money transfers. The measure was framed as a way to prevent lower-income Americans from falling victim to predatory payday lending practices – and from having to rely on Wall Street’s largest institutions.
In a report on reforming the Post Office released by the Treasury Department earlier this year, the government came out against a postal banking option.
“Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued,” the report stated.
Currently, people can go to the Post Office for money orders. In the past, the agency offered Americans the options of opening savings accounts – but that policy ended in the late-1960s.
The debate on postal banking reemerged in the national dialogue about 5 years ago, when it was suggested by the Post Office’s Office of Inspector General. In response to the recommendation, the Post Office said its core function was delivering, not banking.
Sanders is not the only presidential candidate that has endorsed postal banking. New York Sen. Kirsten Gillibrand and Massachusetts Sen. Elizabeth Warren have also advocated for the idea.
The Postal Service, meanwhile, is bleeding red ink. Losses between 2007 and 2018 are about $69 billion. The last time the agency recorded a profit was more than a decade ago. It has also defaulted on more than $40 billion in payments owed to pre-fund retiree health care expenses.
During recent testimony before lawmakers, Postmaster General Megan Brennan said the agency’s Board of Governors is working on a plan to reform operations – and shore up its finances. Meanwhile, experts have recommended closing locations in some rural areas as part of a strategy to put the Post Office on a path toward financial stability.