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A financial system’s most important function is to provide banking needs to all individuals. There is currently a campaign for postal banking to return to the United States, so that lower-income individuals have access to basic banking services. This would not be the first time that postal banking existed in the United States as it was prevalent from 1911 to 1967 (Klein). The United States Savings System eventually lost popularity as depositors became accustomed to FDIC insurance.
In a plan from 2018, Sen. Kirsten Gillibrand proposed that “postal banks would be able to distribute loans to borrowers of up to $1,000 at an interest rate slightly higher than the yield on one-month Treasury bonds” (Klein). Gillibrand envisioned this as a way to provide public banking services to all Americans. If this plan ever comes to fruition, the postal service would completely deviate from its core mission: to mail packages across the country. This is not necessarily a bad thing as post offices would earn a new form of revenue. The United States Postal Service (USPS) has historically struggled to earn revenue as they have lost $77 billion from 2007 to 2019 (Sidorova). The post office would make money on depositors’ accounts, as it would earn the difference in short-term risk-free interest rates and the yield paid out through checking accounts. By implementing postal banking, it would directly compete with retail banks while prioritizing underserved Americans.
Postal banking has the power to “promote an economy that serves the people, not Wall Street” (Campaign for Postal Banking). Our private banking system can act irresponsibly and leave many Americans in the dark. This can be seen during the 2008 financial crisis, where banks were bailed out as many Americans were left to fend for themselves. Additionally, poor lending practices were in effect in 2008 where many Americans were given mortgages that they could never afford. With our financial system not having a public banking service, it is difficult for lower-income Americans to have access to basic deposit services. This is especially important now as many working individuals are living from paycheck-to-paycheck. Even if it just offers a marginal value, postal banking could be a great resource for many working Americans.
Sources:
Campaign for Postal Banking:
Matthew Klein:
Jen Sidorova:
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