“It’s Time for Postal Banking”

Mehrsa Baradaran, Harvard Law Review, February 24, 2014. 

One of the biggest problems in banking today is the large and ever-increasing population of the unbanked — those who are not gaining the benefits of the regulated banking system and must rely on high-cost fringe lenders to do simple transactions like cash their paychecks. The Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau have listed this problem as a top agenda item.1 After decades of unsuccessful regulatory proposals, the solution may finally be at hand. On January 27, 2014, the Office of the Inspector General of the U.S. Postal Service (USPS) released a white paper that proposed that the USPS consider offering financial services to the underbanked.2 Senator Elizabeth Warren has also publicly expressed support for the idea.3 The proposal was immediately criticized by the banking industry as “the worst idea since the Edsel.”4 The main stated concern is that the Post Office lacks the institutional capacity to provide financial services.5 But anticompetitive concerns — namely that a large, well-funded competitor will cut into banks’ business — likely play a role too, as they did in 2005 when Walmart attempted to obtain a banking charter.