Treasury Department Argues Against Postal Banking

Dec 7, 2018 | News

The U.S. Postal Service (USPS) should stay away from postal banking, according to a recently released report by the Department of Treasury. The report’s primary goal was to “identify a path for the USPS to operate under a sustainable business model, providing necessary mail services to citizens and businesses, while competing fairly in commercial markets.”

The report was written by a special task force established via executive order by President Trump on April 12. The president established the task force after expressing concern that USPS has been operating under financial losses since the 2009 recession.

The report makes several recommendations, including authorizing the USPS to “charge market-based prices for both mail and package items” that are not considered essential services and “more closely align wages for both its career and non-career workers with those of other federal employees.”

The report also recommends that the USPS should explore new revenue streams like providing licenses for hunting and fishing or renting out space to nearby retail establishments. The report however explicitly shoots down the idea of USPS establishing a postal banking service.

“Given the USPS’s narrow expertise and capital limitations, USPS should not pursue expanding into new sectors, such as postal banking, where the USPS does not have a demonstrated competency or comparative advantage, or where balance sheet risk would be added,” said the report.

The American Bankers Association (ABA) issued a statement agreeing with the report’s opposition to postal banking. ABA “has long opposed granting banking powers to USPS, noting that it might be perceived as a government-endorsed provider competing with taxpaying banks and that it would create risks that USPS is ill-suited to manage.”

The Credit Union National Association (CUNA) also opposed the establishment of postal banking. In a statement issued earlier this week, CUNA said that it “has been strongly opposed [to] any expansion of the postal service’s into financial services.”

Postal banking does have several prominent Democratic supporters however, including Elizabeth Warren (D-MA), Kirsten Gillibrand (D-NY), Sherrod Brown (D-OH), and Bernie Sanders (D-VT). For many of them, postal banking could be a way to counter short-term, small-dollar credit providers.

In introducing legislation that would establish postal banking, Sen. Gillibrand claimed that “Literally the only person who is going to be against this [legislation that would establish postal banking] is somebody who wants to protect payday lender profits.” The legislation has yet to make it out of committee.

With Democrats controlling the House next year, the fight over postal banking is likely to continue well into the future.

 

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