Battle Over Postal Banking Reignites
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The recent proposal for the U.S. Postal Service to sell banking services invites comparisons to Walmart's equally controversial, and ultimately abandoned, 2005 bid for a banking charter. Both would-be financial industry game-changers are large and ubiquitous, but there are some notable differences.June 23
WASHINGTON The push to expand banking services at the country's post offices continues to gain momentum, though numerous questions remain about the design and scope of such an effort.
Lawmakers, financial groups and U.S. Postal Service employees gathered Wednesday here to further discuss a white paper by the postal agency's inspector general to introduce new financial products at post office locations nationwide.
The paper, unveiled in January, set the financial services industry abuzz, and caught the attention of some high-profile lawmakers, including Sen. Elizabeth Warren, D-Mass.
The daylong conference, hosted by Pew Charitable Trusts, sparked a lively debate on the proposal, with advocates, including Warren, cheering the idea as a way to provide affordable financial products to the underbanked while at the same time shoring up the post office's trouble finances.
"It's time to build on the good work of the Inspector General and to encourage the Postal Service to use its existing statutory authority to expand the basic financial services that it offers," said Warren, during a keynote address.
Still, the Massachusetts Democrat acknowledged that the devil lurks in the design and details of the program, pointing to the "many questions and implementation challenges" that remain.
She argued that the postal agency will need to carefully balance its efforts to generate revenue against providing affordable products to low-income families.
"History shows that, without careful safeguards, institutions that start out with the goal of increasing access to financial services can lose sight of that goal if their attention turns to maximizing profits," the lawmaker said.
Warren also urged the USPS to "explore the idea of partnership" with small financial services institutions to help provide a bridge for customers to more traditional banking services.
"If post offices teamed up with their closest credit unions or community banks, they could provide a pathway for millions of people into the traditional banking system," she said. "Over time, people who routinely use lower-cost services at a local post office might be encouraged to take out a car loan or open up a checking account at a local credit union or community bank."
David Williams, the USPS inspector general, added that the agency has already started to hear from financial institutions and others interested in taking part of any future program.
"Since the paper's release in January, we've been approached by many groups in the financial industry and small startups, consumer groups, local and state governments interested in trying it out together," he said.
Williams said the IG's office believes the Postal Service could begin introducing ATMs, non-reloadable prepaid cards and additional check cashing services at post office locations under existing statute, but would need a sign-off from the Postal Regulatory Commission or Congress to jumpstart additional business lines. He also emphasized that the post office previously offered banking services for many years, and noted that it's common practice in many countries around the world.
Warren added during her remarks that she is "old enough to remember" the post office offering "basic savings accounts as recently as the 1960s," which "helped bring hundreds of thousands of recent immigrants into the financial system."
Still, others at the conference remained more circumspect about the need for a postal banking program at all.
"Is there a fundamental flaw in the consumer financial market today... which requires the intervention of the federal government to step in and offer a so-called public option?" said Dong Hong, regulatory counsel at the Consumer Bankers Association, during a panel discussion.
Other panelists raised concerns about whether the program would be profitable, how it would compete with the banking industry and what kind of training post office employees would need. Some suggested a partnership model with financial institutions might be more workable, in part due to staffing concerns.
"When we talk about a partnership as I envision it, and I think most credit unions would also, they have a hard time seeing postal service employees serving their members," said Ryan Donovan, senior vice president of legislative affairs at the Credit Union National Association. "When we talk about partnership, we're talking about the credit union leasing some space and establishing its own facility within the post office."
Rep. Darrell Issa, R-Calif., a vocal critic of the USPS, had a number of doubts about the viability of the plan at what he sees as a troubled agency.
"If you have an organization that has a median age of workforce of 60, it has facilities located often in the wrong places and often too many of them, it has been losing high-single-digit billions of dollars every year, it has a labor force that is not responsive to change... would this be the organization... on which you would build this new financial sub-enterprise?" he said. "Don't assume that somebody's new idea for a business model is going to add anything to the bottom line of the post office."