Borak’s Take: The Postal Banking Revival Movement

By Donna Borak, The Wall Street Journal, Aug. 8, 2016.

Should cashing a personal check or even maintaining a small amount in a savings account be as easy as buying stamps? Some Democrats think so.

Tucked into the Democratic Party’s 2016 platform is a push to renew the U.S. Postal Service’s authority to offer basic banking services—small transactions that could help those living paycheck to paycheck avoid steep fees and hard-to-break cycles of debt.

Proponents say postal banking would have a twofold benefit: help the estimated 9.6 million U.S. households that lack access to banking services, and boost the finances of the postal service, which has been unprofitable since 2006. Supporters include liberals led by Sens. Elizabeth Warren (D., Mass.) and Bernie Sanders (I., Vt.), postal unions, as well as the postal service’s Office of Inspector General, which has released several reports on the issue.

Still, the government agency has been reluctant to act, arguing providing financial services is not in its wheelhouse, and instead has shrunk services under the burden of a congressional mandate to pre-fund retiree health-care benefits at roughly $5.5 billion a year.

In many other countries—including the U.K., France, China and Japan—post offices also serve as banks, which has helped improve their revenues. And U.S. post offices used to offer basic banking services, starting in the early 1900s to serve waves of new immigrants, but that was scrapped in the 1960s as part of an effort to streamline the government.

Bringing postal banking back to the U.S. in a big way would ultimately require action from Congress, as a 2006 law bars the postal service from providing any new nonpostal services.

But observers say the postal service could expand its existing limited financial offerings—money orders, international money transfers, U.S. Treasury check-cashing and prepaid cards—without new legal approvals, according to a 2015 report from its inspector general. For instance, it could add the option to wire money electronically between post offices, the report said. Advocates say the post office could build on existing services to provide debit-card transactions or check-cashing.

Given the perpetual gridlock in Congress, much of what the postal service could do hangs on whether there is a strong appetite by Postmaster General Megan Brennan to move in this direction, experts said. One possibility aired by supporters is to run a pilot program to assess whether there is demand for such services—something the post office is authorized to do. Ms. Brennan declined to comment through a spokesman.

“The power lies within the post office,” said Mehrsa Baradaran, a professor at the University of Georgia and the author of “How the Other Half Banks.” “At this point, it’s her decision.”

Responding to calls for postal banking, the postal service published a statement on its website last month. “Our core function is delivery, not banking,” the agency said, noting the limited financial services already offered. The post office said it’s willing to consider whether it can legally provide other banking services “at a profit and without distracting” from its core business, but noted “public policy and regulatory discussions” are required first.