Advocates push for post office banking

WASHINGTON - Until the late 1960s, you could walk into a post office and deposit money in a savings account at the same time you bought stamps or mailed packages.

An outgrowth of the financial panic of 1907, the no-frills postal bank surged in popularity during the Great Depression. But as commercial banks expanded and offered higher interest rates, the U.S. Postal Savings System became as outdated as a black-and-white movie.

Now, after another financial crisis, there's a new push for the U.S. Postal Service to deliver basic banking services again.

The effort is led by consumer advocates, financial-reform groups, postal labor unions, and some leading liberals, such as Sen. Bernie Sanders (I., Vt.) and Sen. Elizabeth Warren (D., Mass.). They say postal banks could provide cash-strapped consumers with an affordable alternative to payday, auto-title and other short-term loans that have been criticized for high fees.

"We can have our Postal Service provide modest banking to low-income people where they can cash their checks and they can do banking," presidential candidate Sanders said on ABC's Jimmy Kimmel Live in October. "I think it will help the post office, and it will help millions of low-income people."

The Postal Service's Inspector General's Office agrees. It estimates that expanding financial services beyond the current limited offerings, which include money orders and international money transfers, could mean $8.9 billion a year for the agency.

"The Postal Service has a public mission to serve citizens and support the growth of commerce," the Inspector General's Office said in a report last spring that presented five potential approaches for expanded banking services. "And while it is required to cover its costs, profit is not its key motive."

The American Postal Workers Union has formed a coalition, the Campaign for Postal Banking, that in December delivered a petition with more than 150,000 signatures to Deputy Postmaster General Ronald A. Stroman urging the agency to expand its financial offerings.

"Big banks are turning their backs on families," union president Mark Dimondstein said. "Without bank accounts, they fall prey to predatory lenders."

Postmaster General Megan J. Brennan has not ruled out the notion of expanding banking services, which her predecessor dismissed. But she has some reservations.

"While we currently provide our customers with certain financial services, including money orders, electronic-funds transfers and cashing of U.S. Treasury checks, our core function is not banking," the Postal Service said in a written statement.

The agency said it has an "infrastructure that is not ideal as a banking platform," and cited a decline in visits to post offices. Plus, any investments outside of its core function of mail delivery "will likely be scrutinized from both public policy and regulatory perspectives."

The Postal Service is an independent agency that since 1971 has been required to rely on sales of stamps and other services to pay for its operations. But the growth of the Internet and competition from private shippers, such as FedEx and UPS, have taken a major toll on its finances.

After peaking in 2006, total mail handled by the Postal Service has declined 27 percent. That has led to a budget deficit, exacerbated by a congressional requirement to pre-fund retirement benefits for its workers, that has forced the service to borrow up to its allowable limit of $15 billion from the U.S. Treasury.

Expanded financial services offer "the single best opportunity for new revenue," according to the Inspector General's Office.

It's not a far-fetched idea. Post offices in many nations, including the United Kingdom, France, China and Japan, also serve as banks. From 1911 to 1967, the U.S. Postal Savings System offered accounts with annual interest capped at 2 percent, to reduce competition with commercial banks.

The 2007-2009 recession led to calls for the revival of postal banks as many cash-strapped households have been forced to seek payday loans and other alternative financial products.

A Federal Deposit Insurance Corp. survey found that about 9.6 million households in 2013 had no one with a bank account. An additional 24.8 million households had accounts but also used alternative financial services, such as payday loans.