The U.S. Postal Service is blowing back on a proposal from its inspector general for the cash-strapped mail carrier to expand further into financial services.

"Our core service is delivery, not banking," Toni DeLancey, a Postal Service spokeswoman, wrote in an email to American Banker on Wednesday. "While we appreciate the [inspector general's] research and do not reject all the ideas in the paper, we find the report misleading and incomplete."

The response comes nearly two weeks after the IG issued a report that said the post office could raise as much as $1.1 billion in revenue by expanding remittances, offering new check-cashing services and operating ATMs.

The May 21 report — titled "A Road Ahead for Postal Financial Services" — was a follow-up to a controversial paper published by the inspector general last year, urging the Postal Service to raise much-needed additional revenue by offering prepaid cards or small-dollar loans.

The final report offered a scaled-back set of recommendations that would not require congressional approval and presumably could be put into effect quicker.

But that postal banking lite plan was not enough to win the support of the Postal Service.

In the email, the Postal Service criticized the accounting that, it said, underlies the IG's recommendations. The post office has a "higher cost structure and higher fixed institutional costs" than commercial firms, making it difficult to compete on price or take market share in the financial services sector, DeLancey said.

Additionally, the Postal Service faulted the inspector general for highlighting potential revenue but not discussing costs. Expanding the agency's existing financial offerings would only increase profits by $100 million to $200 million and would "not materially change our financial condition," DeLancey wrote.

"While we know that the [inspector general] understands this is not the case, less financially oriented stakeholders may not understand this nuance unless it is explicitly spelled out," DeLancey said.

The IG's office did not immediately respond to a request for comment.

The response is the latest development in what has been a vigorous debate over the past year about the role of the public sector in providing financial services.

Liberal lawmakers, including Sen. Elizabeth Warren, D-Mass., have supported postal banking as a way to address the mail carrier's continual budget woes, while also addressing the needs of low-income families and the underbanked.

Financial trade groups have bashed the idea. The Independent Community Bankers of America described the Postal Service as a "floundering operation," and questioned its qualifications to provide financial services, in a press release last month following the IG's report.

Still, some bankers have been receptive to the inspector general's ideas. Some members of the North Carolina Bankers Association said they were intrigued by the idea of postal banking, after listening to an Oct. 7 speech by IG David Williams at the trade group's annual management conference.

And, while the Postal Service slammed the IG's most recent proposal, it did not completely close the door to future moves into banking.

"We are currently providing certain financial services" such as money orders and cashing U.S. Treasury checks, DeLancey said. "To the extent that our research concludes that we can legally provide additional services at a profit and without distracting from our core business, we will move forward."

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