Support Builds for Postal Banking

Since the idea of postal banking as a way to break the grip of payday lenders on the working poor and to preserve good post office jobs was first recommended by the postal service’s inspector general and championed by the postal unions, as well as various civil rights and social justice advocates, the proposal has gained new support this fall from a presidential candidate and two prominent national publications.

“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,” Democratic presidential candidate Bernie Sanders told an interviewer in mid-October. “I think that the postal service … can play an important role in providing modest types of banking services to folks who need it.”

Around the same time, The Atlantic and The Washington Post web sites posted articles making more detailed arguments for Sanders’ position. Mehrsa Baradaran, author of How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy, wrote in The Atlantic that “anywhere from 20 to 40% of the population must rely on check cashing or payday lending services” and spend up to 10% of their income—“more than they spend on food”—for financial services. These Americans commonly live far away from bank branches and don’t have enough assets to qualify for low-interest bank loans.

At the same time, Baradaran points out, payday lenders use money borrowed at low interest from large commercial banks to make their own high interest loans. Those banks, in turn, can loan to corporate payday lenders because of their federally-insured customer deposits and Federal Reserve money obtained at 1 percent interest. “The truth is,” says Baradaran, “that government-supported banks serve the well off, and a ‘Wild West’ of fringe lenders and check-cashing joints answer the needs of everyone else, at a hefty price.”

Postal banking existed from 1911 to 1967, writes Joe Davidson of The Washington Post. Post offices are present in neighborhoods, towns and villages without banks, and could handle small savings accounts while offering modest loans. “Its well-trained workforce is already experienced at handling complex transactions and watching out for related fraud and other risks,” according to the inspector general’s report.

Unfortunately, the postal service now seems trapped in the never-ending cycle of Washington dysfunction. Since December 2014 the postal service’s Board of Governors has only three of nine appointed positions filled (all three were appointed by George W. Bush), and that number could be reduced to one this month. Given that situation, the Board created a Temporary Emergency Committee to exercise its powers (such as setting postal rates) until a quorum of appointed members is again in place.

Controversy surrounds President Obama’s five nominees to the Board, primarily because one nominee, Mickey D. Barnett, has been a lobbyist for the payday lending industry, while a second, James C. Miller III, has advocated for privatizing the postal service since the 1980s. The Leadership Conference, a coalition of civil and human rights organizations, has written the Senate leadership asking them to oppose all five nominations and Sen. Bernie Sanders, apparently in an attempt to force the issue of a limping post office that is hemorrhaging jobs and reducing service, has put a hold on the nominees. Meanwhile, various proposed bills aimed at restoring lost service and removing onerous requirements to fund 75 years of future retiree health benefits appear to be going nowhere in this Congress.

Obama has seemingly given up on getting a Board of Governors more sympathetic to restoring the postal service to what it once was, and Republicans are generally in favor of privatizing the post office. Moreover, when Democrats did control the Senate they did nothing to get approval of the President’s earlier set of Board appointments, or to forcefully push reform legislation. With politicians in both parties clearly indifferent to bolstering a service that exists for the benefit of all citizens, and that could rescue poor Americans from the tyranny of payday usurers, it’s not hard to understand why many feel disinclined to vote for either party.

Neil Cosgrove is a member of The NewPeople Editorial Collective.

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