Senator Bernie Sanders’ idea to increase the responsibilities of the glorious post office by making it into a bank has been gaining traction recently. Sentimentality of the mythical postman riding a mule down the Grand Canyon with a sprawling backpack full of letters would make for an excellent Wes Anderson movie, but returning to the present day, the post office is a prime example of petty bureaucrats operating a business so deep within the red that not even a modern day Moses could save them. It is bewildering that people would applaud an idea to expand responsibility to a failing entity.
The basic proposal I found when perusing Bernie Sanders site was that “the post offices would offer basic checking and savings accounts, debit cards, direct deposit, online banking services, and low-interest, small dollar loans ” with the goal of ending lending discrimination. Bernie argues that 1.5 billion people worldwide are served by some degree of postal banking and that the United States has done it before.
These arguments are less compelling when one understands several inconvenient truths for a socialist. First, the U.S. stopped the previous postal banking service because the private sector had provided the services at competitive rates.
Secondly, the only reason the post office is surviving is because of monopolistic advantages granted by the government. Currently, the USPS enjoys certain privileges: It is the only entity with access to your mailbox; it may borrow up to $15 billion from the U.S. Treasury at lower interest rates; it does not have to pay taxes, tickets, or vehicle fees; it is immune to civil actions; it has eminent domain and it has government regulatory power. These advantages should theoretically make any company successful.
Despite all of these advantages, the USPS still managed to lose $69 billion dollars since 2007 (https://www.usnews.com/opinion/articles/2014/07/07/the-postal-service-should-not-offer-banking-services). That’s only taking into account measurable loss, and does not examine the opportunity cost associated with a lack of innovation. This means accounting for all of the other things one could do with the resources and money instead. The post office has never been concerned about efficiency and because of this has not caused any innovation. Rather, long lines, lost passports and mangled packages are the norm. It is mind-boggling that with the post office being both billions of dollars in the red and lacking efficiency, one would want to expand its services beyond a scope that it already cannot handle.
There’s no shortage of reasons why adding to the responsibilities of the post office would have nefarious effects. First, postal banking would try to solve a problem that does not exist. In America, we have thriving financial service industries, and installing another national banking system would be a tremendous waste of money. Secondly, newcomers such as pawn shops or check-cashing liquor stores largely eliminate the need for traditional banking services. Thirdly, the manner in which we measure “underbanked” is largely useless. An important piece of context is that “underbanked” households are more likely to have access to smartphones, and apps like Venmo, CashApp and PayNearMe.
This data suggests that the post office would be unlikely to compete successfully, but also, assuming that post offices do become banks, unforeseen effects on the economy leave many worse off. One can look to Britain’s postal banking as an example. Britain has allowed postal services to serve as bank branches largely, causing the market to react by closing 762 banks in 2017. The problem is that the bank branches have largely closed within poor neighborhoods, weakening the financial health of the vulnerable communities.
The other thing that is often forgotten in discussions about payday loans being compared to potential postal banking is that high interest rates on short-term unsecure loans being changed because unsecured lending to those who earn little and lack assets is risky, especially from a service that ignores solvency. More obviously, employing new tellers where a thriving industry resides is burning money. It remains a poor idea to believe that the U.S. should return to an outdated system. Sorry Bernie, but I prefer Chase.
Isadore Johnson is a contributor for The Daily Campus. He can be reached via email at firstname.lastname@example.org