U.S. Postal Service: Bank on it
Post offices can serve as banks for those who desperately need one, all that’s needed is for big-bank lobbyists to get out of the way
The Steve Goodman U.S. Post Office in Chicago’s Lakeview neighborhood: why can’t it also serve as a bank for those local residents who really need one? (One Illinois/Ted Cox)
By Marie Newman and Ameya Pawar
This November, the U. S. Postal Service will serve as a bulwark for our democracy. It can also help lead the economic recovery from the coronavirus pandemic by providing desperately needed financial services at all post offices.
Over the last quarter century, the deregulation of banks and Wall Street led to mergers, consolidations, and closures of community banks across the country. For perspective, in 1985, there were 18,033 banks insured by the Federal Deposit Insurance Corp. across the nation; by 2018, there were just 5,477 such banks across the United States. Today, there are more giant banks serving smaller footprints, leaving many communities with little to no access to formal banking services. As a result, according to the FDIC, over 80 million Americans are underbanked or unbanked. In other words, many have no bank account — and even those who do rely on alternative financial service providers like payday lenders to make ends meet. According to bank-policy expert Mehrsa Baradaran, the average unbanked family with an annual income of around $25,000 spends about 10 percent of its income on alternative financial services. The alternative financial services industry is big business and part of an extractive economy that denies millions the opportunity to save, buy a home, or start a small business.
If private banks do not want to serve 25 percent of Americans, postal banks can fill this gap. Despite recent polling showing 75 percent of all voters support the USPS offering essential financial services, bank-industry lobbyists continue to oppose postal banking. Instead, there are conversations about placing JPMorgan Chase ATMs at post offices. We believe in competition and fairness, which is why we support a convenient solution: postal banking. Post offices can provide a robust public option and finally treat banking as an essential public utility.
Banks perform two critical functions. People and small businesses need banks to deposit their earnings, process payments, and obtain credit. Then, at the community level, banks are supposed to lend locally to spur economic development. When people and businesses deposit money in a bank, a tiny fraction gets held in reserves. The rest gets lent out to people to buy homes or finance businesses. A loan becomes a new deposit, and the deposit becomes a loan. This repeating process is how new money gets created in the economy, so where this money flows or does not flow must be a matter of public concern. Money creation is an act of public policy as it impacts property values, school funding, and economic development. In summary, people need banks to manage their financial affairs, and communities need deposits to fuel economic growth. It really is that simple.
We need a local public banking option on a national scale, along with branches to provide the underbanked and unbanked with an elegant turnkey solution. Post offices already have the infrastructure to provide banking services on a national scale. Nearly every community has a post office, and they already handle cash and sensitive materials and have vaults. They employ trained personnel, and the postal system owns a fleet of trucks and planes when money needs physical transport. All that is needed is for the big-bank lobbyists to get out of the way.
“All that is needed is for the big-bank lobbyists to get out of the way.”
Postal banking is not a new idea; it was a beloved service in the United States from 1911 to 1967. A 21st-century reboot to postal banking can offer basic checking and savings accounts in every post-office branch. Postal banks can extend small loans to people and businesses to turbocharge new business creation and help people make ends meet.
It is an old idea, to be sure, but it is also a great idea designed to grow our economy. Postal banking will empower Americans to save money and reduce debt, provide access to capital, inject more disposable income into the economy, all while leveraging an existing institution — USPS — already complete with locations, skilled staff, and security.
In short, postal banking will provide access to the financial system for people who have been squeezed out of the banking system, forging a desperately needed path for working families and workers to build real wealth.
Building an economy that works for all, not just some, is the most American and patriotic step we can take to rebuild our economy.
The final bonus is that it is ready to go.
Marie Newman is the Democratic nominee for Illinois’s 3rd Congressional District. Ameya Pawar is a former Chicago alderman and fellow with the Economic Security Project and the Open Society Foundations. He is writing the forthcoming book “Organize Capital: The Case for Public Banks.” He is also a co-founder of One Illinois.