Should The Post Office Offer Banking Services?

You're probably aware that crooked multimillionaire Darrell Issa (R-CA)-- a car thief, street thug and arsonist-for-profit-- has been working on a plan to abolish the post office on behalf of his allies at for-profit delivery systems at FedEx and UPS. We are potentially just one election away where Republicans get the power to irreversibly shutter the American postal service.

Senator Elizabeth Warren has come up with a proposal that would save the post office and provide basic, crucial banking services for millions of underserved families who have no checking or savings accounts. In an OpEd for Huffington Post she wrote that "According to a report put out this week by the Office of the Inspector General (OIG) of the U.S. Postal Service, about 68 million Americans-- more than a quarter of all households-- have no checking or savings account and are underserved by the banking system. Collectively, these households spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $2,412 per household. That means the average underserved household spends roughly 10 percent of its annual income on interest and fees -- about the same amount they spend on food… The poor pay more, and that's one of the reasons people get trapped at the bottom of the economic ladder."

Her proposal, following a model that has been working well in European countries, authorizes the post office to offer "basic banking services-- nothing fancy, just basic bill paying, check cashing and small dollar loans" that "could provide affordable financial services for underserved families, and, at the same time, shore up its own financial footing."

Over the last few days, I've been asking the Blue America candidates, and the candidates we're in the midst of vetting, to go over Warren's plan and see if they'd be willing to back it in the House. Several have already been campaigning on it in their races. Lee Rogers, up in the Santa Clarita, Simi Valley, Antelope Valley district (CA-25), where Buck McKeon has sided with Issa in his jihad against the post office, Rogers has promised that "If elected to Congress, I'd be one of the most vocal defenders of the US Post Office." This is a statement he made for voters in the L.A. area district:

"Up until this point, Republicans in Congress have made every effort to dismantle the US Postal Service. They even make crazy laws to keep it at a disadvantage to private industry. Senator Warren's proposal would save the USPS and keep it competitive with the private sector by allowing it to offer new lines of revenue-generating service. I wholeheartedly support her bill and would proudly sponsor it in the House. In addition to this, we need to scrap some of these laws designed to make the USPS fail, like the one forcing the USPS to spend billions of dollars pre-funding the retirement of workers that aren't even born yet. The Postal Service also needs the ability to purchase and build out its own infrastructure, like planes, instead of paying their private competitors, FedEx and UPS, to carry the mail for us."

State Senator Daylin Leach, our candidate for the May primary to fill the open congressional seat in PA-13, has been already working on this issue. This morning he told is "It's obscene that people who struggle to put food on the table and pay their heat bill have to spend up to 10% of their income on check-cashing fees and loan-shark level interest to pay-day lenders simply because our cowardly major bank chains refuse to service low-income areas. The US Postal system is not only equipped to provide basic banking services, up until 1967 they did just that. It's time to bring that idea back and do something to actually help hard-working, low-income people survive."

Similarly, the progressive candidate for Congress in Oklahoma City, Tom Guild, is also fighting against the GOP's plan to privatize the post office-- which would especially hit hard residents in rural and exurban Oklahoma like his neighbors in Pottawatomie and Seminole counties-- and he thinks Warren's plan solves the problem in a way that benefits many Oklahomans who are struggling financially. “Many payday lenders prey on the working class by charging eye popping interest rates for loans,"he told us this morning. "The working class engages in a constant struggle to make ends meet and to pay their bills. Allowing the USPS to offer basic banking services makes sense. The working class would have an option to avoid exorbitant interest rates, and would have access to lower cost, stable, and reliable banking services. This common sense and innovative approach is the right thing to do.”

Paul Clements is running for the southwest Michigan seat, currently held by Issa anti-post office extremist Fred Upton. Clements told us he sees this in a very similar way to the way the rest of our progressives candidates are looking at it: "Senator Warren’s proposal to let the Post Office offer basic banking services, like savings accounts, debit cards, and simple loans, is an idea whose time has come. Over a quarter of US households have limited or no access to financial services, so they’re pushed to payday lenders, pawn shops, and other high cost alternatives, while credit cards and other financial services are ever more essential. Here’s a way to reduce poverty, help the post office, and improve the economy all at once. Let’s take it a step at a time to make sure the design is right-- but clearly it makes sense."

Last month David Dayen, writing in the New Republic suggested President Obama use his new found willingness to stand up to Republican sabotage and obstructionism to move forward unilaterally on the very plan Senator Warren has been advocating.

The Inspector General, who conducted the study with the help of a team of experts in international postal banking as well as a former executive from Merrill Lynch, correctly frames the proposal not as a challenge to mega-banks, but as a way to deliver needed amenities to the nearly 68 million Americans-- over one-quarter of U.S. households-- who have limited or no access to financial services. Instead of banks, these mostly low-income individuals use check-cashing stores, pawnshops, payday lenders, and other unscrupulous financial services providers who gouged their customers to the tune of $89 billion in interest and fees in 2012, according to the IG report. Post offices could deliver the same services at a 90 percent discount, saving the average underserved household over $2,000 a year and still providing the USPS with $8.9 billion in new annual profits, significantly improving its troubled balance sheet. The report calls simple financial services “the single best new opportunity for the posts to earn additional revenue.”

As America becomes more of a cashless society, more reliant on some level of financial services (try renting a car without a credit card), the 68 million under-banked are essentially forced into working with predatory businesses, without the kind of low-cost alternative the post office could provide. Banks don’t want these customers; if they did, they would actually make a play for their business. Large banks have closed branches in the very low-income communities with the largest percentages of unbanked Americans. In fact, banks find it more profitable to fund payday lenders that charge junk fees and outrageous interest-- currently the subject of a Justice Department investigation-- than actually take market share away from them.

Instead of partnering with predatory lenders, banks could partner with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly. As the report says, “the Postal Service could greatly complement banks’ offerings,” and in turn help drive out of business some of the most crooked companies in America, while promoting savings and expanding credit for the poor.

The report suggests three types of potential products. First, it proposes a “Postal Card” that could make in-store purchases, access cash at ATMs, pay bills online, or transfer money internationally. Customers with paper checks could cash them at the post office or deposit them through their cell phones, loading them onto their Postal Card. Second, the USPS could offer an interest-bearing savings account, again through the Postal Card, encouraging savings from communities with little in the way of a personal safety net. Finally, the Postal Service could offer small-dollar loans, effectively an alternative to costly payday lending. The fees on all these services would be drastically lower than anything in the marketplace today.

…Maybe it’s time for President Obama to step in. He’s been looking for something to show he can help improve the lives of ordinary Americans, regardless of Congress’ inaction. Here’s a perfect opening on an issue of equal access, of affordability, of saving an American institution. Sure, the banks will squawk: the chief counsel of the American Bankers Association has already pronounced himself “deeply concerned”-- but as the IG report shows, they have no interest in serving this community. So surely that won’t stop the President from urging the USPS to take advantage of this lucrative and worthwhile option. Unless he values payday lenders and greedy middlemen more than the financial security of the Postal Service and millions of poor Americans.

Blue America's most recent endorsee, George Gollin, the Illinois progressive in the race to replace corporate shill Rodney Davis in IL-13 (a swing district that stretches from Bloomington and Champaign to Decatur and Litchfield and down to the northern suburbs of St Louis) has had some first hand experience with the system Senator Warren is proposing-- from when he worked at a particle physics lab in Marseille-- and he backs it. "I think it's a great idea for USPS to offer customers basic banking services," he told us a few minutes ago. "It will put trustworthy financial services providers into communities that have long been underserved by the banking industry, and have found themselves prey to predatory lenders charging usurious rates and fees. And the infrastructure is already in place, so this can be done quickly."

A candidate we're still getting to know, Patrick Hope, the founder of the Virginia legislature's progressive caucus, and who is running for the VA-08 seat Jim Moran is giving up, has been campaigning on this issue already and posted this to his FaceBook page last week:

This morning Patrick reiterated what the other Blue America candidates have been saying, namely that "The payday lending industry is destroying communities all over the United States, including the Rt. 1 area in my Congressional District. I would be happy to work to eliminate that industry in any way possible. Senator Warren's proposal to do so by partnering with the USPS is visionary and would also help to balance the USPS budget. It is the ultimate "win-win" type of legislation and I look forward to co-sponsoring it next year as a member of Congress."

Author, activist and founder of Project Angel Food, Marianne Williamson, who's running for the seat Henry Waxman gave up is someone we're just getting to know and this morning she told us that she saw the problem with the post office as another way in which the government doesn't work for the people. "Pay day lenders prey upon the poor of America, and this legislation would help stop that. It would serve the people and serve the post office as well. Warren's bill reflects her characteristic zeal for returning America to its people, and I wholeheartedly hope to co-sponsor such a bill in the House."


UPDATE: And… Hawai'i Checks In!

Stanley Chang is the progressive in a crowded primary in Honolulu, filled with conservative Democrats, for the seat Colleen Hanabusa is giving up. The Blue America vetting process is just about done and you'll be seeing him on our list very soon. Meanwhile, he agrees with Senator Warren that this is the way to go. He just told us: "Almost one quarter of American families live outside the mainstream banking system and spend, on average, over 2,000 dollars per year on costly fees and services such as payday loans, bill paying and check cashing. With 35,000 locations across our country the US Post Office is well-positioned to provide these service at a low cost to families and is exactly the kind of innovation our financial system and working families needs. Providing basic financial services to working families at a dramatically reduced rate while pushing some of the most unscrupulous banking service providers out of the market is a smart move for America."