Column by Loretta Redd
With a story that begins in 1792, I’m not sure I’ll get to all the details in one brief article. But if you don’t mind speed dating through the history of our Postal Service, we’ll at least hit the high points.
It was President George Washington who first recognized the importance of postal delivery; he understood that mail enabled anyone access to information, especially in rural areas. Our forward thinking President made the Post Office a Cabinet level department, naming Benjamin Franklin as the first Postmaster General.
Roughly fifty years later, Congress granted the Post Office a monopoly for delivery. By 1860, parcel post service was instituted and mailboxes were installed, for which Hallmark card recipients should be eternally grateful.
What I didn’t know, and few of us recall, is that the Postal Service also operated as a banking system. Following the financial panic and bank closures of the 1900’s, the Postal Service began allowing citizens to open small savings accounts, as well as make check withdrawals.
By the end of WW II, the Post Office had over $4 million in accounts, and more than $3 billion in deposits. These financial services, mostly used by low to moderate income Americans, were offered through the postal system from 1911 until 1967.
And they could be again.
Massachusetts Senator Elizabeth Warren, has proposed the reinstitution of the post office bank, “If the Postal Service offered basic banking services–nothing fancy, just basic bill paying, check cashing and small-dollar loans– then it could provide affordable financial services for underserved families, and, at the same time, shore up its own financial footing.”
Our mail delivery system has weathered some difficult challenges over its history, including Congress which seems to have systematically ravaged any efficacy and efficiency from today’s USPS. The inscription on the New York post office building may read: “Neither snow nor rain nor heat nor gloom of night stays these couriers from swift completion of their appointed rounds,” but it didn’t take Congressional greed into account.
The post office came close to collapsing under its own success in the mid 1960’s, given the volume and demands of mail service. Unfortunately, the Postal Department was not allowed to make investments or to borrow money for infrastructure.
With the 1971 Postal Reorganization Act, Congress abolished the United States Postal Department and created an independent agency, called the United States Postal Service. The “new” USPS was to be based more on a corporate model:
” The United States Postal Service shall be operated as a basic and fundamental service provided to the people by the Government of the United States, authorized by the Constitution, created by Act of Congress, and supported by the people. The Postal Service shall have as its basic function the obligation to provide postal services to bind the Nation together through the personal, educational, literary, and business correspondence of the people. It shall provide prompt, reliable, and efficient services to patrons in all areas and shall render postal services to all communities. The costs of establishing and maintaining the Postal Service shall not be apportioned to impair the overall value of such service to the people…”
Unfortunately, Congress did not see fit to reestablish the banking portion, but did leave the post office open to stiff competition from private industry in other areas, like package delivery, copying services and ‘payday’ check cashing .
An article in the Nation cites a discussion paper by the United Nations Department of Economic Affairs, “The essential characteristic distinguishing postal financial services from the private banking sector is the obligation and capacity of the postal system to serve the entire spectrum of the national population, unlike conventional private banks, which allocate their institutional resources to service the sectors of the population they deem most profitable.”
The United States was not the only country to offer banking services through the postal system. Other nations such as China, Japan and Germany still do, most with very lucrative assets.
Most of today’s challenges to the fiscal soundness of the United States Postal Service are due to Congressional meddling and “oversight.” In 2001 the General Accounting Office discovered a piggy bank…the USPS had overfunded its pension obligation by more than $80 billion.
“In a sane world, the USPS would be allowed to use this overage to pay down debt, invest in technology and expand services,” writes an investigator in the Huffington Post. But since the Post Office is part of the Federal budget the capacity to use the overfunded money for investment would in effect, raise the deficit, so it was held for other services.
Elaine Kamarck of the Harvard Kennedy School of Government summed the post office conundrum up this way, “Congress wants it to be self-sufficient, but doesn’t want it to make money.”
What could have been a boon for the USPS in the age of e-commerce, Congress would not allow discounts for parcel shipping. Lobbyists for alternative delivery and mail services, such as FedEx or Mailboxes, Etc, have continually used financial influence to decimate proprietary postal services.
It would seem, then, that Congress strongly favors competition with the private sector…well, until it comes to the banking industry and their well-heeled lobbyists. Restoring the Post Office bank would compete with banks, and take away from the very profitable “payday” check cashing companies.
“Yes,” you say, “but their customers are high risk, irresponsible low-life, so they have to charge more.” A Pew Charitable Foundation study found that separated or divorced women, ages 25-44 with incomes under $40,000 were the least able to secure normal forms of credit or to qualify for standard banking services.
So, single women are largest users, or ‘victims’ of these services that have a finance charge of $14.99 to cash a $100 check, which is an APR of 390.8%. That’s a lot of dollars with President Washington’s face printed on them.
Senator Warren’s legislation will not only return stability to the USPS, it will pressure the predatory practices of these check cashing companies, give ‘big banks’ some competition, and be a pathway to pride and fiscal responsibility for millions of Americans.