Millions of low-income Americans depend on check cashing institutions, pawn shops, and payday loans to fulfill much of their banking needs. These places are notorious for ripping people off and serves as one of the countless barriers that keep poor people impoverished.
Senator Bernie Sanders advocates that the postal service provide these services in low-income and rural areas that may not have banking institutions, or where residents are forced to use costly alternative financial services.
"I want to see our post office be reinvigorated," said Senator Sanders in a recent interview. "And one of the ways that I think we can help not only the U.S. Postal Service, but help a lot of low-income people -- if you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don't want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it."
The U.S. Postal Service Office of Inspector General supports Senator Sanders' idea as well. "The Postal Service is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector," writes the USPS in a 2014 report. "Millions of Americans do not have a bank account, or use costly services like payday loans and check cashing exchanges just to make ends meet. The entire underserved population comprises more than a quarter of all U.S. households -- some 68 million adults. They are an economically diverse mix of working and middle-class families, poor and unemployed people hurt by the recent economic crisis, young people, immigrants, and others who are trying to make it paycheck to paycheck. Together, they represent a huge market. In 2012, they spent about $89 billion just on interest and fees for alternative financial services."
Many critics would argue the Postal Service is becoming obsolete as people favor email over paper mail, and that the USPS has been losing money over the past few years. Senator Sanders refutes those arguments, citing the USPS losses are entirely due to a financial burden imposed on the USPS by the Bush administration in 2006, which has forced the government organization to pay 75 years of future retiree health benefits in a 10-year period, costing about $5.5 billion a year. "In fact, from 2003 through 2006 the Postal Service made a combined profit of more than $9 billion," adds Senator Sanders in a press release issued earlier this year.
If the postal service added basic banking services, it would help millions of American families, and improve the financial foundation of the USPS.
From 1911 to 1967, the Postal Service also served as a bank, offering services like basic checking and savings accounts. Reverting back to those practices is an opportunity to help Americans in poverty that are constantly price gouged by alternative financial institutions that function off of predatory tactics. The USPS would not be competing with private banks as those banks refuse these low-income, high-risk customers, and have steadily been closing branches in these communities for years.
Postal Offices in other countries currently serve as banking institutions as well, such as Japan, that have proven the benefits of those services offered by postal offices. Roughly 93 percent of the World's national postal services offer some banking services.
Adding banking would help the Postal Service thrive in the digital age in lieu of massive budget cuts in favor of privatizing the jobs and services the USPS currently offers.
According to Mehrsa Baradaran, a professor at the University of Georgia School of Law, the Federal Reserve assists banks struggling through temporary credit crunches and should the federal government should do the same for struggling individuals. "One of the great ironies in modern America is that the less money you have, the more you pay to use it," writes Professor Baradaran in an excerpt from her latest book, How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy:
A public option in banking would balance the scales of government support for the banking industry and could potentially drive out the usurious fringe-lending sector, which profits from Americans' financial woes. There are millions of individuals whose otherwise stable financial lives can be upended by one unexpected event that snags them in an otherwise temporary liquidity crunch.