Say what now?

Just hear me out. We all know the US Postal Service is in trouble. They keep having to increase stamp costs to cover their bloated organization and retirement commitments. And yet, we still hear of the potential to cancel weekend service to further save funds. Instead, USPS has been closing offices and selling off some of their buildings, which do have some of the most valuable real estate in the country. But that’s not enough. Our postal service is in need of major reforms.

One such reform floating around sounds a bit crazy: turn the Post Office into a bank. The argument is fairly simple. The post service already has an extensive branch network that rivals all banks in geographic dispersion. They can reach the so-called “unbanked“. This is also fairly common in other parts of the world. India, Brazil, Germany, Korea, as well as Great Britain all have them. Japan’s postal bank is actually the largest bank in the world by assets, trumping anything here in the US or in Europe. Oh, and up until 1967 the US had one too. It was called the US Postal Savings System.

So this idea at least has some merit. In the old system, postal deposits were kept with local banks the depositors collected interest set by the government. The new system could do this or, as the first link above suggests, invest in government bonds. It wouldn’t provide any lending services except to our governments. The idea would be the postal bank helps fund the rebuilding of our nation’s crumbling infrastructure.  The case has already been made for having a national infrastructure bank, rolling this into the postal savings bank would hit two birds with one stone.  It’s not as crazy as it seems.

But I still don’t love it.  A national infrastructure bank is a good idea.  But a postal bank isn’t.  The reason we stopped the postal bank in the first place was that people starting using traditional banks more and more.  Reaching the unbanked has been a challenge for the industry, but a postal bank isn’t going to make much of a dent.  You don’t need physical infrastructure anymore so much as the technological backbone to do your banking remotely.  Our post office can barely do their one function day-to-day; you don’t give a crumbling organization a whole host of new and unrelated responsibilities.

Don’t take my word for it though, form your own opinion.  Many people don’t trust our banks, so a new bank that’s technically owned by the government might garner more trust.  It was also take business away from the megabanks.  Take a read of some of the links above and let me know in the comments if a postal savings bank might be a solution for either the post office, or the country.

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categories: banking, government