Sen. Bernie Sanders has a plan to solve low-income America's banking problems: get the mailman to hold their money.
The Democratic presidential candidate has called for the U.S. Postal Service to offer basic banking services such as saving accounts, check cashing and even providing loans.
Sanders envisions it as an alternative to traditional banking, one shorn of the "greed" of large commercial banks that would serve the needs of people without access to those services.
It also would serve a second purpose: Helping postal worker unions. The additional revenue the Postal Service would bring in from banking may prevent any need for cutbacks and make privatization less likely.
"Sanders has been a leader in making sure that the Postal Service has the opportunities it needs to offer new services and products," said Warren Gunnels, policy director for Sanders' campaign. Entering banking would prevent any need to "eliminate Saturday delivery [or] shut down post offices and mail processing facilities," he said.
Getting into banking would net the Postal Service $8.9 billion in new revenue annually, the Postal Service Inspector General's Office estimated in 2014.
"I don't think you could say it would rule out any possibility of privatization, but it would certainly allow the Postal Service to get on a more secure footing," said Sally Davidow, spokeswoman for the American Postal Workers Union, which has endorsed Sanders' presidential bid.
The union heads a coalition group called the Campaign for Postal Banking. Other members include the National Association of Letter Carriers, the National Postal Mail Handlers Union and the National Rural Letter Carriers Association. Gunnels said Sanders is working with the unions on the issue.
"Nonprofit financial services provided by the USPS could help struggling families nationwide achieve financial stability — and strengthen the USPS mission to serve the public," the coalition says on its website.
The Postal Service reported a $5.1 billion net loss last fiscal year, due to the declining use of traditional mail and requirements that it aggressively pay down future pension obligations. It was the ninth consecutive year it posted a loss.
While subject to congressional authority, the Postal Service is mandated to function as a regular business. It receives no taxpayer funding, getting its revenue solely from its products and services. Congress must approve any change in its business plan.
Conservatives have long called for privatizing the post office and pointed to its finances as one reason to do it. Privatization would reduce labor's influence over the institution since unions wouldn't be able to appeal to friendly lawmakers any longer.
The inspector general's study found that 68 million adults do not have a bank account, instead relying on services such as payday loan centers. That costs them on average $2,412 an year in interest and fees.
The banking industry is not fond of the idea of the Postal Service poaching its turf. In a 2014 letter to Sens. Tom Coburn, R-Okla., and Tom Carper, D-Del., regarding legislation that would have allowed the service to engage in unspecified "non-postal activities," they warned that, "Given the Postal Service's unique governmental status, its entry into the financial services market would raise serious unfair competition concerns." Several financial trade associations, including the American Banking Association, signed the letter. An ABA spokesman did not respond to a request for comment.
Free-market advocates argue that postal banking creates the risk that the Postal Service would become like mortgage giants Fannie Mae or Freddie Mac: A government-sponsored enterprise that Congress would feel obligated to bail out if it ever got into trouble.
"The notion that the government will do something better and more efficiently than the private sector is a farce," said Dan Mitchell, senior fellow with the libertarian Cato Institute.
Gunnels said that Sanders' plan would involve only basic banking services such as savings accounts, check cashing and small loans. It would also offer services like no-fee debit cards.
Many advocates of the idea, such as Sen. Elizabeth Warren, D-Mass., say postal banking likely would require that the Postal Service get into partnerships with existing banks since it lacks the necessary tools and expertise.
Ironically, even Sanders, a socialist, agrees that may be necessary in some cases, according to Gunnels. He emphasized, though, that Sanders would extend the partnerships only to small community banks or credit unions. Large commercial banks would not be considered.
Some postal union members are wary of the Postal Service getting into banking precisely because it is not clear how it would be done. One source, who requested anonymity, said it was a good idea in theory but the specifics in all of proposals were far too vague.
Postal banking is not unprecedented, advocates note. From 1911 through 1967, the Postal Service offered customers a savings account program. It still offers some financial services, such as providing money orders.
The saving accounts were capped at $500 initially, later rising to $2,500. It offered low interest rates, just 2 percent, but was popular due to the ease of use and the belief, especially during the Great Depression, that the Post Office was a safer place to store money than traditional banks.
The program declined in 1960s as depositors steadily moved into traditional banks, which offered higher interest rates. The program was finally abandoned in 1967.