Some members of the Congress want to allow the USPS to engage in financial services and banking. Is this really a good idea?

Prescott Valley, AZ Correspondent-Postal controversies have been brewing in one way or another since financial inefficiency and deficits have become part of the post office’s legacy for a number of years, so whether the USPS should be allowed to expand upon its existing financial services and possible banking services is questionable.  

Since the postal service currently offers basic financial services (and has done so in the past), which consist of international electronic cash transfers, government check cashing, issuance of both domestic and international money orders for purchase, the possibilities are there for expansion of financial services and, at one time, the Post Office even offered savings bank accounts for postal customers, but are expanded services just another government provision that should be scrutinized?

Those in Congress, particularly Senator Elizabeth Warren from Massachusetts and Representative Darrell Issa from California have bantered back  and forth over the issue of the Postal Service expanding its financial operations while dealing with the Postal Reform Act of 2016, which is written to “ensure the efficient and affordable delivery of mail, by giving the agency more flexibility for product development, consolidation of mail delivery and agency oversight, and most notably, addresses the  pre-funded postal workers healthcare mandate.”

A big part of money taken in by the Postal Service is devoted to the pre-funded retiree health benefits for its employee/retirees.  The cost, $5 billion a year in a required lump sum payment, results in about 20 cents of every dollar from the Postal Service going to healthcare.  Along with this cost, Postal Service employees are contributing billions to Medicare, which they are not using.  The current bipartisan legislation proposes the creation of special postal health plans, which would be integrated into Medicare and would require postal employees to use them.

With the various post office inefficiency issues that the Reform Act addresses, it is hard to say how much of the legislation would, could or should be devoted to additional financial and banking services.  Though the time is right for postal reforms, increased financial and banking services could be premature,   particularly if the services are to be subsidized by the government.  Current Postal Service requests by the Postmaster General, Megan Brennan, include plans for saving money, integrating full Medicare coverage, bringing back postal rate increases, calculating retirement benefits, and allowing for more product adaptability.  Costs have to be made up somewhere, especially with the serious decreases in mail volume because of mobile communication and internet use.  First-class mail has suffered the most with a decline of 35 percent.

With the current financial obligations concerning postal employee’s healthcare, which Representative Issa was largely responsible for imposing upon the Postal Service, the service has been obligated to deal with the 75-year pre-funding burden, which has put a critical damper on postal innovations and any chance of more widespread financial and banking services.

This health insurance debacle appears to have become the albatross around the neck of the Postal Service since 2006 when Congress required the Postal Service to fund retiree health benefits for the 75-year time frame.  About $18 billion has been paid into the fund but according to the GAO (Government Accountability Office) $28 billion in payments have been missed and not received.

In 2014, the U.S. Postal Service reported that millions of people in the United States did not have bank accounts and were not able to use or afford services such as check cashing and payday loans.  The Postal Service noted that they were already in the position to provide financial services to those whose needs could not be met by traditional banking.  They felt that expanded financial services could be met by teaming up with banks while utilizing the expertise those banks could offer with any new financial structural changes the Postal Service initiated.

The idea of the Postal Service providing extended financial and banking services and partnering with local banks sounds good on paper and in practice, but would the Postal Service be able to uphold and maintain financial and banking operations on a continuous basis without misspending and driving themselves towards more losses, particularly with the demands presently being made by the Postmaster General?  Also, would those acquiring and investing in the services use them in the right capacity without injecting fraud and illegal activity into the picture, and would the Postal Service itself impose high costs on low-income customers?

Though the Postal Service reported revenue of around $69 billion in 2015, which showed a 1.6% increase from 2014, they still have incurred losses since 2007, so financial stability and trustworthiness are relevant issues.  With the Postal Service already providing international money transfers and issuing millions in money orders that are mailed or transferred outside of the United States, more expanded and involved services could possibly create problems from outside foreign sources.

The USPS acting as an alternative financial/banking system for those in low income communities where the post office is the hub of the community could be viable if the operation were structured on a business model rather than a government handled and subsidized operation that comes complete with government intervention, high costs, overregulation and other problems.  Financial services and banking need to be handled by independent entities and experts, not a federal government affiliate.

Gastonia, NC Correspondent-The idea of letting the United States Postal Service get into the financial services business sound like the opening for a bad “Saturday Night Live” routine, but after pondering it for a while I’m thinking it might not be the worst idea Washington has ever had.  (That honor would go to the brief stab at making ketchup a vegetable during the Reagan years.)

But let’s think about this logically.

Banks are fairly secure buildings.  There are surveillance cameras everywhere, and a pretty tightly controlled system of access to the tellers.  Walk into a post office and you’ll get very much the same setup.  They already have computer terminals and cash drawers at every clerk station, so handling deposits and other normal counter transactions would work fine.  As long as the USPS employees are able to handle the extra training, they should be able do most of what a bank teller does while selling stamps and weighing packages.

There is one somewhat disturbing note here, though.  The government already exercises an unhealthy amount of control over our nation’s economy.  The Fed uses the Prime Rate like a tiller on a ship, steering us back and forth and artificially manipulating things to keep inflation under control and other economic indicators in line.

Would the USPS compete with commercial banks and credit unions?  That’s a tremendously bad idea, and while I’m no constitutional scholar I’m almost positive it’s illegal.  I can see thousands of private bank employees being put out of work once you can bank and handle your mail at the same place. What will become of them?

So, while the convenience aspect would definitely lead one to think that postal banking is a good idea, I’m not sure letting the government into yet another aspect of our lives is worth it.  Keep bringing me my Time magazine every week, but I’ll continue doing my banking elsewhere.

 Owatonna, MN Correspondent-The U.S. Postal Service (USPS) has been plagued by budget overruns, complaints about the cost of postage, poor service issues, and competition from private carriers such as Federal Express and UPS, for decades now. There is a persistent cry to eliminate the USPS from the government or to at least privatize the agency. Now some members of Congress want to allow the USPS to engage in financial services and banking, apparently as a way to solve their budget shortfalls and make the USPS self-sufficient.

The knee-jerk reaction is “Why let them expand to new products and services when they can’t even be profitable at their core service—mail delivery?” However, a careful consideration of the idea suggests this might be possible, depending on the services the USPS might offer.

To make this work, the USPS would have to perform diligent market research to determine if there is a niche they might be able to fill in the financial industry. Assuming they find a niche service—maybe a simple thing such as check cashing, ATM service, or some other basic service such as offering checking or savings accounts similar to what a credit union might offer—the USPS might be able to make a profit.

However, it’s unlikely that the hundreds of companies already engaged in financial services and banking have missed any opportunities to provide service to their current customers. One need only think of how many ATMs we have easy access to, or how quick and efficient online banking and investing have become in the past twenty years.

It’s doubtful that neither the USPS management nor Congress has the vision, foresight, and entrepreneurial spirit and talent to find a way to make financial services a profitable arm of the USPS. It is not a good idea. It is a poor idea grown out of frustration, desperation, and the ingrained belief by too many politicians that government can and should provide all the solutions to our country’s problems.

 

Sheffield, Jamaica Correspondent-The USPS has served America well. Frankly, the USPS has been seamlessly integrated in the American society, providing postal services for the mass. Bernie Sanders has been endlessly promoting various features in his democratic campaign, including raising the tax of the wealthiest and the works. He also included passively, that the postal services could provide a modest type of banking service that is well needed by the poor. Hmm… I’m thinking to myself if this is really a good idea.

I know Bernie is all about the poor, but there is just so much that can be done from a human standpoint. While he’s not the only member of Congress who’d love to will that idea into life, I will have to disagree with it. Allowing the USPS segment to remain an independent entity and only deal with postal services is a good idea. Banks and financial establishments operate differently on so many levels. I just believe the two entities should remain separate. In the past (1910), a postal-savings system was implemented by William Howard Taft but that didn’t last. If allowed to be implemented today, I believe it’ll also turn out to be a failure.

 

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