The Unity Task Force created by presumptive Democratic presidential nominee Joe Biden has called for a “postal banking” system for people who don’t have access to regular banks, while experts and government reports pan the idea.
“I do not think it is the solution to improving the reach of financial services in our country,” said Carrie Hunt, executive vice president of government affairs and general counsel for the National Association of Federally Insured Credit Unions.
Hunt is not alone in her assessment.
The Government Accountability Office, which audits the federal government, released a report in March that tapped the opinions of postal service officials and other stakeholders about the U.S. Postal Service adding banking to its amenities list and deemed that the post office “may not have the expertise nor the required capital” to pull it off.
The report also stated that the idea “may generate minimal revenue” as the post office seeks new income streams as it reported revenue losses of over $8 billion last fiscal year. This isn’t the first time that the agency has reported such losses.
The Postal Times reported on Friday that “over the past 14 years, the United States Postal Service (USPS) has lost $78.5 billion and now has $143 billion in unfunded liabilities. No one should be inspired enough by that performance to allow the agency to handle anyone’s money.”
The Treasury Department also opposes granting the post office the power to provide financial services because of its limited capital reserves and lack of experience in the banking sector.
Its report from December 2018 stated that “given the USPS’s narrow expertise and capital limitations, USPS should not pursue expanding into new sectors, such as postal banking.”
It went on to state that the post office “does not have a demonstrated competency or comparative advantage” when compared to the entities that already provide these services, like credit unions or banks.
“It’s really whether or not they are receiving the best service from the post office,” said Hunt. “If that’s not achieved, then we’re creating a new entity with potential risk cost that does not provide a real benefit.”
Calling to create a postal banking system is not a new idea, but it was thrust back into the headlines when the Unity Task Force, which was created by Biden and independent Sen. Bernie Sanders from Vermont, called for a postal banking system for people who don’t have access to regular banks.
The Unity Task Force document did not specifically define the term “postal banking” but states that the “government should provide easily accessible service locations, especially postal banking to make it possible for everyone to access physical banking locations.”
Sen. Kirsten Gillibrand of New York, previously a rival for the Democratic nomination, introduced legislation in the prior Congress, the “Postal Banking Act,” that would grant the U.S. Postal Service the power to provide basic financial services, such as check cashing and bill payment services, as well as allow people to open a savings account and apply for small-dollar loans.
It is unclear if what the senator introduced in 2018 is the same as what the Unity Task Force has proposed.
Democrats such as Rep. Alexandria Ocasio-Cortez from New York and Sen. Elizabeth Warren from Massachusetts have supported postal banking proposals, none of which have become law. Also, the creation of a postal banking system was included in Hillary Clinton’s 2016 presidential platform.
