Postal Service should stay out of banking: Treasury

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A new Trump administration report on how to reform the U.S. Postal Service throws cold water on the idea of a foray into the banking business.

The report, released Tuesday, echoes arguments that bankers frequently make in opposition to postal banking, namely that the USPS is ill-equipped to manage the risks involved.

“Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued,” the report states.

U.S. Post Office worker, postal banking, mailman, postman
A United States Postal Service (USPS) letter carrier delivers mail in Shelbyville, Kentucky, U.S., on Thursday, Dec. 22, 2016. More than 30 million packages handled by the USPS are estimated to be delivered on December 22, which is still a fraction of the 750 million packages this holiday season, a 12 percent increase over last year. Photographer: Luke Sharrett/Bloomberg
Luke Sharrett/Bloomberg

The debate over postal banking was launched in 2014 when the Postal Service’s Office of Inspector General floated the idea.

The proposal drew criticism from both the USPS and from lenders with which the Postal Service would have competed. “It’s the worst idea since the Ford Edsel,” said Cam Fine, who was then the CEO of the Independent Community Bankers of America.

But postal banking has the backing of several Democratic senators who are mulling presidential bids, including Elizabeth Warren of Massachusetts, Kirsten Gillibrand of New York and Sherrod Brown of Ohio, as well as Vermont Independent Bernie Sanders, so it could become a more prominent political issue over the next two years.

Supporters of the concept argue that the USPS, which operates more than 30,000 post offices, is well positioned to offer more affordable credit to millions of Americans who rely on payday loans. They also note that banking services would offer a new source of revenue for the struggling Postal Service.

The USPS reported a net loss of $3.9 billion in fiscal year 2018, its 12th straight year of net losses.

In April, President Trump created a task force to make recommendations on how to make the post office financially sustainable. The task force was chaired by Treasury Secretary Steven Mnuchin. It also included representatives from the Office of Management and Budget and the Office of Personnel Management.

The task force’s 69-page report recommends that the Postal Service explore some new business opportunities, such as offering licenses for hunting and fishing. The report also suggests that existing post offices should rent out space to other retailers.

The American Bankers Association was among the groups that provided input to the report.

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Consumer banking Steven Mnuchin Treasury Department American Bankers Association
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