Unlike Zima, Postal Banking Should Be Left In The Last Century
Like any product that makes a short comeback, its supporters fall into two categories: those that used it and remember it for its nostalgia, and younger users who value it for the novelty inherit with the uniqueness of a bygone era. After a few months of popularity it’s gone again for another few decades.
The idea of postal banking is no different, Senator Kirsten Gillibrand’s (D-N.Y.) recently introduced Postal Banking Act (S.2755) would allow the United States Postal Service (USPS) to offer checking, savings, and loan services.
Gillibrand’s plan isn’t as original as it may seem. Postal banking can be traced back to 1910 when the United States Post Office Department offered deposits and loans. While popular at first, the program withered as the decades passed and private banks proved to be a better investment, finally coming to an end in 1967.
Despite its failure, Sen. Gillibrand’s efforts to breathe new life into the dead program is not the first. Similar to the sugary brew Zima, postal banking comes full circle every few years, most recently by self-avowed socialist Sen. Bernie Sanders (I-Vt.) in 2015.
USPS itself has a track record that would indicate postal banking would be a terrible idea as it’s operated in the red for twelve consecutive years. The thought of the mail delivery service reentering the banking industry is fiscally concerning, especially for taxpayers who will inevitably foot the bill if they fail to turn a profit.
Still, proponents of the legislation argue that it’s necessary for the Post Office to provide these financial products given the number of bank branch closures in recent years. They argue that turning the 30,000 USPS locations into hybrid banks will alleviate the problems for underbanked communities. However, FDIC data from 2017 shows 89,857 bank branches in the U.S., dwarfing the number of post offices by a factor of three. Besides, some banks like JPMorgan Chase are planning on opening more branches to service new customers. Additionally, credit unions already serve many of our small towns and rural communities across the nation.
Gillibrand’s brick and mortar approach also ignores the fact that demand is driving companies forward to provide innovations like online banking, modernizing consumer access to financial services along the way. Creating a free checking or savings account has become as easy as booking a dinner reservation on OpenTable.
If Sen. Gillibrand really had the best interests of underserviced consumers in mind, then she would have voted for Sen. Mike Crapo’s (R-S.D.) Economic Growth, Regulatory Relief, and Consumer Protections Act (S. 2155) which removed burdensome Dodd-Frank regulations that stymied the ability of small banks and credit unions to meet the needs of their customers. She further voted against consumer interests when she stood for keeping the Bureau of Consumer Financial Protection’s needless rules on arbitration and auto-lending.
Representative Patrick McHenry (R-N.C.), the chief deputy whip in the House and vice chairman of the Financial Services Committee, has also expressed concerns over the return of postal banking, penning a letter to Treasury Secretary Steven Mnuchin, asking that President Trump’s postal reform task force consider prohibiting “any pilot programs, enhancements, or expansion to its nonpostal banking services”.
Additionally, McHenry has filed an amendment to the upcoming Financial Services and General Government appropriations bill that would prohibit taxpayer dollars from going to USPS in their attempts to expand into the financial sector, as well as barring funding to a postal banking pilot program made between USPS and the AFL-CIO.
While there may be a place in the current economy for the Post Office to continue to deliver mail and packages, its financial management over the last decade should cause others to think twice when trying to revive products out of pure nostalgia instead of practicality. Her efforts to resurrect postal banking is nothing more than an attempted solution in search of a problem.
Matthew Adams is a federal affairs associate at Americans for Tax Reform, a nonprofit group dedicated to lower taxes and limited government.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.