Postal Banking Is Finally a Reality in (Some of) the United States
A pilot postal banking program has been implemented in a number of U.S. cities. Next, let’s rapidly expand it—and take it nationwide.
The Covid-19 pandemic has revealed that, while we’re all interconnected — through the air we breathe, our public health systems, the economy — the government is largely absent in American life, leaving us to fend for ourselves as individuals in the so-called “free market.”
The crisis has wreaked economic havoc on working Americans. But U.S. billionaires have gotten 62 percent richer during the pandemic, while over 86 million Americans lost jobs, some 3 million households now report concerns of imminent eviction, and essential workers — particularly Latino, Indigenous and Black workers — continue to die from Covid-19 at disproportionate rates.
The vaccines now saving hundreds of thousands of lives were developed using public research and funding. But the pharmaceutical companies that own the patents on these vaccines now refuse to share critical information to countries dealing with the devastating consequences of the pandemic. And in a number of states, officials have handed over vaccine deployment, testing, and other critical services to corporations, pitting the profit motive against the public interest.
In other words, a privatized America is a divided, unequal and lonely place.
This is why a new experiment from the U.S. Postal Service (USPS) to offer postal banking is so remarkable. In September, the country’s most popular federal agency began offering paycheck-cashing services at several East Coast post offices — in collaboration with the American Postal Workers Union (APWU) and after being pushed by numerous community groups. Now, anyone can redeem paychecks in Washington, D.C., Baltimore, Md., Falls Church, Va., and the Bronx in New York City in return for Visa gift cards up to $500. The postal agency expects to expand the program to bill-paying services and ATMs in the future.
The APWU’s role cannot be overstated. Alongside financial reform, faith and community groups, the union launched the Campaign for Postal Banking in 2015 and organized years of rallies and days of action to make the program a reality. APWU also delicately negotiated with Postal Service management to enact the pilot, as reported by the American Prospect.
By offering banking services, USPS is choosing to use public power to make a real difference in many Americans’ lives, rather than leave us to compete against each other in private markets. The Federal Deposit Insurance Corporation (FDIC) estimates that 7 million U.S. households do not currently have a bank account and another 20 million are underbanked, meaning they have a bank account but rely on payday loans, check cashing services and other alternatives. Payday lending is notoriously predatory, with rates as high as 589 percent—and the industry often targets Black and Latino communities. While the new program’s check cashing fee — a flat $5.95 — is higher than it should be, it’s lower than what some private companies charge, which can add up to $15 or more.
This approach is not exactly new — USPS actually offered postal banking from 1911 to 1967. During this period, the program provided a stable alternative to private banks, first for immigrants, then for white farmers during the Great Depression, and then the wealthy in the 1940s, as they sought reasonable returns in the era’s low-interest economy. It was ended in an effort by the Lyndon B. Johnson administration to streamline the government.
Today, more than 90 percent of post offices worldwide offer financial services, making the U.S. a global outlier. Recent polling shows that a strong majority of Democrats and Republicans support postal banking. California Gov. Gavin Newsom just signed a bill to study a state-level public option for banking services such as debit cards.
We need to demand an expansion of these pilot programs to thousands of post offices nationwide, both in cities and rural areas. A full 69 percent of census tracts with a post office location — representing 60 million people — do not have a community bank branch. The people who live in these areas either go unbanked or rely on large Wall Street banks inclined to predatory tactics, like pushing credit cards, charging high fees and even opening accounts without consumers’ knowledge.
And we need to fire back when the big banks and their ideological allies trot out age-old — and inaccurate — critiques of postal banking. Ross Marchand of the right-wing Taxpayers Protection Alliance reacted to the news in the American Banker by claiming: “Lawmakers need to confront a government run amok instead of calling for federal banking.” Marchand claimed that “plenty of companies” offer no-fee bank accounts with no minimum deposit requirements. But if that’s really the case, then why do one in four U.S. households go unbanked or underbanked?
The truth is that the predatory lending industry targets vulnerable Americans, particularly people of color. Black people, for example, are about twice as likely than whites to live a mile from a high-interest, short-term lender such as a pawn shop or payday lender.
Right-wing forces are opposed to postal banking because it threatens what is a multi-billion-dollar industry with an interest in keeping poor and working Americans locked in cycles of debt just to afford rent and groceries. For example, the Trump administration ended an Obama-era rule that forced payday lenders to make sure that borrowers can repay their loan when it comes due.
The post office’s new program is a welcome start after years of pushing by postal workers, community groups, and public officials, like Sen. Bernie Sanders (I‑Vt.) and Rep. Alexandria Ocasio-Cortez (D‑N.Y.), who introduced postal banking legislation in 2019. It might seem radical, but that’s only because Wall Street cronies and right-wing critics want us to think it is. But postal banking is actually as American as apple pie — a public good that’s paid for by all of us, that serves all of us, and doesn’t leave anyone behind.
Donald Cohen is the founder and executive director of In the Public Interest, a national research policy center that studies public goods and services. He is co-author (with Allen Mikaelian) of The Privatization of Everything (The New Press), to be released in November 2021.