Until the late 1960s, you could walk into a post office and deposit money in a savings account at the same time that you bought stamps or mailed packages.
An outgrowth of the financial panic of 1907, the no-frills postal bank surged in popularity during the Great Depression. But as commercial banks expanded and offered higher interest rates, the United States Postal Savings System became as outdated as a black-and-white movie.
Now, after another financial crisis, there’s a new push for the U.S. Postal Service to deliver basic banking services again.
The effort is led by consumer advocates, financial reform groups, postal labor unions and some leading liberals, such as Democratic presidential candidate Sen. Bernie Sanders, I-Vt., and Sen. Elizabeth Warren, D-Mass. They say postal banks could provide cash-strapped consumers with an affordable alternative to payday, auto-title and other short-term loans that have been criticized for high fees.
“We have millions and millions of low-income people who have to go to these payday lenders and pay outrageous interest rates. They’re getting ripped off right and left,” Sanders said on ABC’s “Jimmy Kimmel Live.”
“We can have our Postal Service provide modest banking to low-income people where they can cash their checks and they can do banking,” Sanders said. “I think it will help the post office and it will help millions of low-income people.”
The Postal Service’s inspector general’s office agrees. It estimates that expanding financial services beyond the current offerings, which include money orders and international money transfers, could mean $8.9 billion a year for the service.
“The Postal Service has a public mission to serve citizens and support the growth of commerce,” the inspector general’s office said in a report last spring that presented five potential approaches for expanded banking services. “And while it is required to cover its costs, profit is not its key motive.”
The American Postal Workers Union has formed a coalition, the Campaign for Postal Banking, that in December delivered a petition with more than 150,000 signatures to Deputy Postmaster General Ronald A. Stroman urging the agency to expand its financial offerings.
“Big banks are turning their backs on families,” union President Mark Dimondstein said. “Without bank accounts, they fall prey to predatory lenders.”
Postmaster General Megan J. Brennan hasn’t ruled out expanding banking services after her predecessor dismissed the idea. But she has reservations.
“While we currently provide our customers with certain financial services, including money orders, electronic funds transfers and cashing of U.S. Treasury checks, our core function is not banking,” the agency said in a written statement.
The service said it has an “infrastructure that is not ideal as a banking platform,” and cited a decline in visits to post offices.
Plus, any investments outside of its core function of mail delivery “will likely be scrutinized from both public policy and regulatory perspectives.”
The Postal Service is an independent agency that since 1971 has been required to rely on sales of stamps and other services to pay for its operations. But the growth of the Internet and competition from private shippers, such as FedEx and UPS, have taken a major toll on the agency’s finances.
After peaking in 2006, mail handled by the Postal Service has declined 27 percent. That has led to budget deficits, exacerbated by a congressional requirement to prefund retirement benefits for its workers, that have forced the service to borrow up to its allowable limit of $15 billion from the U.S. Treasury.
Expanded financial services offer “the single best opportunity for new revenue,” according to the inspector general’s office.
It’s not a far-fetched idea. Post offices in many other nations, including Britain, France, China and Japan, also serve as banks. And from 1911-67, the United States Postal Savings System offered accounts with annual interest capped at 2 percent, to reduce competition with commercial banks.
The 2007-09 recession led to calls for the revival of postal banks as many cash-strapped households have been forced to seek payday loans and other alternative financial products.
A Federal Deposit Insurance Corp. survey found that about 9.6 million households in 2013 had no one with a bank account.