Last Friday, the U.S. Postal Service announced its end of fiscal year results, which were quite bleak. The country’s second-largest civilian employer reported a net loss of $5.1 billion for fiscal year 2015 (October 1, 2014 – September 30, 2015), a trend that has recurred for more than a decade. The postal service reiterated in a news release that the loss was largely due to financial mandates, which are out of the agency’s control, and reported that in spite of the loss, total revenue was $68.9 billion for the year, an increase of approximately $1.1 billion from 2014.
We recently discussed the volatile financial state of USPS, and this latest report contributes to the agency’s grim outlook. While many lawmakers have called for privatizing the money-losing agency, one political candidate has recently called for a different approach — postal banking.
2016 presidential candidate Bernie Sanders is challenging Hillary Clinton for the democratic nomination. Though the self-proclaimed democratic socialist is viewed by many experts to be a long-shot for the presidency, Sanders’ plan for the postal service has garnered substantial media-attention and some support. The American Postal Workers Union (APWU), which represents over 200,000 federal workers and retirees, officially endorsed the candidate earlier this month.
In a news release, APWU President Mark Dimondstein advocated that Sanders “is a leader in the fight to protect our public Postal Service.”
Postal Banking: A Blast from America’s Past
So how would postal banking work exactly? According to this article from The Atlantic, postal banking would allow post offices across the country to cash checks, run savings accounts, and perform other basic financial services while charging low interest rates to contribute to the agency’s income. This practice is common throughout countries in Europe and Asia, and has been utilized by America as well.
Postal Banking, known as the Postal Savings Program, was introduced by President Taft in 1911 and lasted until 1967. The goal was to help provide low interest savings options for immigrants and poorer Americans. Savings initially accrued 2.5 percent interest, with a half percent allocated to the postal service operation.
With the postal service operating in even the most remote areas of rural America, postal banking services could be a welcomed reprieve from having to commute for limited banking services. Lower interest rates may also be beneficial to the 28 percent of Americans who reportedly rely on high-interest check-cashing and payday lending services.
“If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it,” said Sanders in an interview with Fusion.
Though media reports have generally veered in favor of the prospect of postal banking, a recent survey indicates the public may view it differently. A Citizen Cabinet survey conducted by Voice of the People, a non-partisan organization, found that only 32 percent of survey participants supported the postal service offering small-scale banking services. In contrast, an overwhelming majority of participants supported the agency exploring new business opportunities – 9 in 10 respondents recommended allowing USPS to provide new non-postal products and services.
Though postal banking may not have enough public support to become a reality, it’ll be interesting to see if lawmakers begin to take a more formative approach to solving the postal service’s financial deficit. It’s important to remember that the agency was founded through innovation, and that same innovation may be what’s ultimately necessary for its revival.
EDITOR’S NOTE: Since this article was originally published, the American Postal Workers Union has launched a petition, calling on Postmaster General Megan Brennan to implement postal banking
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