The Inspector general of the US Postal Service has completed a detailed report on something people in many countries take for granted: Banking Services offered by the Post Office. While it may seem a bit strange to us, a few moments thought reveal that there are a number of very exciting benefits to the concept. Moreover, it seems clear that the USPS already has legal authority (under The Postal Accountability and Enhancement Act (PAEA) of 2006) to extend their existing financial services to include consumer banking. Jump below for juicy excerpts from the report, and pithy analysis from yours truly as well as the incomparable Yves from NakedCapitalism.com. Or just spread the word and leave the wonking to us!

Naked Capitalism:

Naked Capitalism readers have frequently called for the Post Office to offer basic banking services, as post offices long have in many countries, notably Japan. That idea has gotten an important official endorsement in the form of a detailed, extensively researched concept paper prepared by the Postal Service’s Inspector General. I’ve embedded it and strongly urge you to read and circulate it.



One of the stunning parts in reading the document is to see how wildly successful this program could be, precisely because traditional banks are withdrawing from many of the neighborhoods in which moderate and lower-income people live, and non-banks offer targeted, richly priced services, too often designed to take advantage of desperation or simple lack of alternatives. Even though most of us are aware of this general picture, the USPS IG, dimensions the scale of this problem and the costs to the affected households

Underserved Households

There are 34 million un- and underbanked American households, which translates into 28% of the population. And consider what this second-class status translated into in fees and other charges:
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. That amounts to 9.5 percent of their income. To put that into perspective, that is about the same portion of income that the average American household spends on food in one year. In 2012 alone, the underserved paid some $89 billion in fees and interest.

In addition to helping the USPS and creating a bank that does not secretly long to be a hedge fund betting with taxpayer dollars, a USPS Bank has the potential to really help those who need it most, and make a concrete step to reduce the income inequality that is strangling the US economy. The USPS IG puts some numbers on this:

For the most vulnerable Americans — including many of the underserved — the difference between making it and not is a small amount of money. Among the 1.1 million people who filed for personal bankruptcy in 2012, their median average income of $2,743 a month was just $26 less than their median average monthly expenses. Put another way, these people were just $26 a month away from making ends meet.

There is no good reason for banks to be private, and many benefits to banks that are controlled by the public, like the Bank of North Dakota, which did not participate in the depravity leading up to the bankster crash, and avoided the bailouts and treasury looting in the aftermath. Credit Unions also show that banks can behave well, when they are not run for the profits of their directors and executives.
Many Americans are economically marginalized, or thrown to the mercy of the most vile usury, just because they lack access to basic electronic payment technology. This trend is only accelerating, despite good intentions of the largely toothless Dodd-Frank legislation. Direct deposit of paychecks, or government disbursements in accounts or pre-paid cards give the most needy a way back into the world of modern commerce, while cutting out a layer of waste and graft from private processors of public funds. A Post Office Bank could immediately help these people:

Postal Loans would be available to people who have their paychecks directly loaded onto their Postal Service prepaid card (this also could be for government payments, such as Social Security or disability benefits) and have received at least two straight payments. For those whose employers do not offer electronic transfer, they could be eligible for a loan if they load at least two consecutive paychecks onto a Postal Service prepaid card.
People could borrow up to 50 percent of their gross paycheck. For a person who earns $18,000 per year and gets paid twice a month, that is $375. Every borrower could be required to pay a minimum of 5 percent of their gross pay from each paycheck until the loan is paid off. In this scenario, that would be $38 from each paycheck.47 The Postal Service would automatically withhold loan payments from borrowers’ paychecks before putting the difference on their Postal Card. If the Postal Service charged a $25 upfront loan fee and a 25 percent interest rate, the borrower would pay off the loan in 5 1⁄2 months, paying a total of $48 in interest and fees across the life of the loan.

The above essay was originally published on Thursday Jan 30, 2014 at a faux-progressive blog that was, at that time, pretty well known.