Providing low-cost banking by saving the post office

The struggle to save the United States Postal Service is emblematic of the larger struggle against corporate plundering of public resources. Reversing the intentional bankrupting of the post office requires not only a movement of allies that a new union leadership has begun to assemble, it potentially also merges with creating a public banking option.

What does banking have to do with delivering the mail? Nothing, today. But in the future? A Postal Service bank — a model that is successful in several countries around the world — would not only provide the post office with a reliable source of income, it would provide badly needed basic, inexpensive banking services for under-served populations.

Such an idea is not necessarily controversial. Despite the management of the U.S. Postal Service supporting privatization measures for many years, its office of the inspector general quietly issued a paper a year ago in which it said offering financial services could provide almost US$9 billion per year in new revenue while providing badly needed services to tens of millions of under-served people who are currently at the mercy of predatory “pay-day lenders” and other high-interest usurers.

The basis for this estimate is that “people trying to make it paycheck to paycheck” spend an estimated $89 billion per year on interest and fees on alternative financial services; the paper’s revenue estimate is based on the Postal Service, by offering low-cost services, capturing 10 percent of what is currently spent on those businesses. But the Postal Service inspector general’s office went out of its way not to upset bankers, watering down its proposal to a “partner[ship] with banks and other [mainstream] financial institutions” to “create a ‘win-win’ situation.”

Lupin field, New Zealand (photo by Michael Button)

Lupin field, New Zealand (photo by Michael Button)

If big commercial banks are winning, the rest of us will be losing. Rather than floating fantasies of swimming with ever-hungry financial sharks who are never satiated, thereby disemboweling your own idea, why not set up an independent postal bank? Doing so is precisely what the new president of the American Postal Workers Union, Mark Dimondstein, proposes. He says:

“Services such as basic, non-profit banking would be a great and real benefit to the people of this country, and a good answer to what I call ‘the Wall Street Banksters,’ who devastated the economy and with it the lives of millions of people.”

More than one-third of U.S. post offices are located in ZIP codes where no bank is located; another 20 percent are located in areas with only one bank. Providing low-cost services would help tens of millions struggling to survive financially avoid the trap of “pay-day lenders” who charge an effective annual interest rate of 391 percent, according to the inspector general paper. A typical “pay-day” loan of $395 costs the borrower an average of $520 in interest and fees on top of the principal.

Postal banking already a success

Countries as varied as Germany, Japan and New Zealand have successful postal banking services. The Japan Post Bank is the country’s largest holder of personal savings.

For more than a century, what is now known as the Japan Post Bank accepted deposits but did not lend, instead handing deposits to the Ministry of Finance, which used the funds to finance public-works projects. In 2001, the bank began direct lending instead of sending its deposits to the ministry. But this was accompanied by a privatization scheme. That scheme was halted in 2009, and has not been re-instituted despite the return of the conservative Liberal Democratic Party that originally pushed for the privatization. The bank would be a huge prize for private bankers, as it reported net income of ¥355 billion (US$3.0 billion) for its fiscal year 2014.

Germany’s Postbank is also highly profitable, reporting fiscal-year 2014 earnings of €431 million (US$473 million). The bank specializes in providing “simple, low-cost products for day-to-day needs,” and says it has 14 million clients, including more than 300,000 small and mid-sized companies.

New Zealand’s Kiwibank was founded in 2002. Big Australian banks had controlled 80 percent of New Zealand’s retail banking, and those multi-nationals were quick to close less profitable branches. To provide financial services to underserved communities, and keep capital at home for local investment, the New Zealand government established Kiwibank as a subsidiary of New Zealand Post, putting its branches in post offices. The results were swift, reports public-banking advocate Ellen Brown:

“Suddenly, New Zealanders had a choice in banking. In an early ‘move your money’ campaign, they voted with their feet. In an island nation of only 4 million people, in its first five years Kiwibank attracted 500,000 customers away from the big banks. It consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.”

Kiwibank reported net income of NZ$100 million (US$76 million) for its fiscal year 2014. The bank reports it now has 860,000 customers.

The Republican assault on the U.S. post office

Although offering basic banking services would boost revenue for the U.S. Postal Service, it would currently be on stable financial foundations were it not for a Republican plan signed into law in 2006 requiring the Postal Service to pre-fund its pension costs for the next 75 years in only 10 years. No private business could or would do such a thing. The results are what would be expected: In the last four years before the pre-funding requirement (2003 to 2006), the Postal Service had a composite profit of US$9.3 billion; it has had massive losses ever since.

It is true that the volume handled by the post office has declined in recent years with the rise of the Internet. Setting up a postal banking system would offset the resulting fall in revenue. But rather than expand services to provide a sounder foundation, corporate ideology, promoted by those with a vested interest, is instead causing a push for the dismantling of the Postal Service and the privatization of its delivery services.

For example, a study by a “think tank” calling itself the National Academy of Public Administration prepared a report that called for a near total privatization of the post office. Two of the four authors had direct interests in privatization and a third has worked for a series of Right-wing extremist “think tanks” that consistently demand the privatization of everything in the public domain. The major funder of the study was Pitney Bowes Inc., which stands to directly benefit; it already earns billions of dollars from its mail-processing facilities and would be in a good position to grab much of the Postal Service’s business.

FedEx Corp. and United Parcel Service Inc., the two largest U.S. private delivery services, also stand to benefit from the destruction of the Postal Service. Both companies employ large fleets of lobbyists and are heavy donors to members of Congress.

Heavy pressure to close post offices and mail-sorting facilities is part of the privatization drive. But the limited research done on closings indicates that closings actually cost more than the savings generated. A study conducted by University of Wisconsin students examined what would happen if one of the seven post offices in a rural Wisconsin county were closed. The study found that the Postal Service would save $560,000 over seven years by closing a post office but the added costs from residents forced to drive further to access a post office would be $1.3 million over seven years. Thus, the overall cost to the community would be more than $700,000.

Another example of the costs to small communities can be found in the small community of Prairie City, South Dakota. Closing the post office there saved $19,000. The nearest hospital and pharmacy is 40 miles away, and when medicine was needed in Prairie City, the pharmacist 40 miles away would hand it to the mail carrier for same-day delivery. Now medicine deliveries take two to three days, an article in Naked Capitalism reports. What is the price of a life that might be compromised because of this delay?

Vowing a new militancy

A slate of local officials pledged to mount much more militant tactics swept into the leadership of the American Postal Workers Union last fall, winning seven of nine contested seats. Union President Dimondstein, elected with this group, said he seeks a “cultural shift” to an organizing model of unionism from a service model. In an interview with Socialist Worker, he said:

“People are disengaged not because they don’t care but because they see their union dues as a premium to an insurance company or as lawyer’s fees. We need to retool, to retrain people to see the union as themselves. We need to encourage workers to take their grievances directly to the boss, in groups, not just file paperwork and wait for union officials to service them. We need more of a movement, a sense of connection to the larger community which will give postal workers hope and confidence.”

That postal workers are in a position to negotiate is because they defied their union leadership in 1970 to engage in an illegal strike that spread across the country to more than 30 major cities — an example praised by the new American Postal Workers Union leadership. The union, one of four that represent postal workers, began talks on a new contract in February, vowing to end a disastrous three-tiered contact negotiated by previous union leaders. That contract calls for reduced pay for new hires and allows people working only 30 hours a week to be considered “full time.”

At the opening session of the contract talks, the American Postal Workers Union leadership was joined by the president of the National Association of Letter Carriers, Fredic Rolando, in a signal that the postal workers won’t be divided by job description. (The APWU represents clerks, drivers and maintenance workers.) The APWU said it would not only negotiate better pay, but “will be putting forth proposals for maintaining overnight delivery standards, halting plant closings, expanding hours of service and staffing for the customers, and providing financial services such as postal banking.”

To back their new militancy, postal unions have formed an alliance with several dozen labor and advocacy groups called A Grand Alliance to Save Our Public Postal Service. The alliance vows that “The public good must not be sacrificed for the sake of private investment and profit.”

No one group or organization can turn the tide against neoliberalism, but an organized fightback must begin somewhere by someone. If there is going to be serious follow-through on all these initiatives, a dramatic departure from the methodologies of U.S. unions of recent decades would be a welcome start — although this can’t be effective without broad popular support and activity capable of solidarity work and overturning anti-union laws such as Taft-Hartley.

Reforms, however welcome, can only achieve so much and are always temporary. Struggles for reform will be fought again and again, becoming more difficult to sustain, as long as economic systems stress private profit rather than public good.

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10 comments on “Providing low-cost banking by saving the post office

  1. I bank at Kiwibank, which as you describes, operate out of post office outlets (which are all privately run – the government pays franchisees a fee to sell stamps and other retail postal products). Since 2000, the same outlets have provided retail banking under the auspices of Kiwibank. Besides Kiwibank and one other bank, all other New Zealand banks are owned by Australian countries. Kiwis have never been very happy about all those banking profits going offshore.

  2. Jeff Nguyen says:

    I wonder if a hybridization of local credit unions and post offices could take place. Shared costs and profits that almost entirely benefit the local communities they serve. It could also streamline the legislative and adminstrative oversight the feds are required to have over the banks and post offices when they are separate entities.

    Full disclosure: This is literally the first idea that came to mind and may just be a rehashing of your proposal.

    • Sounds like a reasonable idea that merits consideration, Jeff. The form of a postal bank could be a credit union; I hadn’t put any thought into what the specific form of a postal banking system would be, merely presenting an idea that appears to be gaining traction.

      For me, what is important is that private banking be abolished, and all banking becomes a public utility that serves community and local investment needs while providing both a safe, low-cost place for people to deposit their savings and a way to pool savings and capital so that they can be channeled to benefit the community. The Left Party of Germany has an interesting proposal on socializing banks, which I discussed in a post in 2013.

  3. Joel Meyers says:

    I remember something from about 1960, before reality overtook the limits of satire. It was a cartoon, I believe in MAD Magazine, depicting someone in an animated conversation with then-Senator Barry Goldwater (R-AZ), who at the time claimed the title of “Mr. Conservative”, and was regarded as on the extreme right. The caption was in sum and substance “But Barry, the government has always delivered the mail! ” The implication was that Goldwater was so rightwing, that he considered public ownership of the Post Office a dangerous step towards socialism.

    But it was an exaggeration making fun of the ridiculous conclusions that would flow from his ideology: It would have been politically impossible for even Goldwater to seriously propose Postal privatization. The public delivery of mail I believe was actually an American innovation, invented by Benjamin Franklin, and withstood “rain and snow and howling gale.” But by sometime in the 1970s, the Post Office was semi-privatized into the U.S. Postal Service, which started this natural monopoly onto the road of bankruptcy, accelerated by now-obvious sabotage to spin it off altogether into Fedex and/or United Parcel. A fully privatized Postal Service would concentrate on delivering mail in profitable big cities, where varied rates would enable big business to get better service, while everyone would be able to afford only slowed-down service, and in difficult, rural areas, might be cut out St altogether to cut expenses.

    And speaking of banking: Credit and currency functions are monopolized by a semi-private Federal Reserve Bank. Money is not minted, but printed, virtually counterfeited, with frightful consequences in the future. Money is directed towards those who already have more of it than they know what to do with (except of wars and ripoffs). Interest payment on government debt is increasingly swallowing up everything else, and by law must be paid first, before anyone else gets a dime. The average taxpayer is robbed to pay billionaires, to whom the rest of us owe more every year. Court case-law has justified this violation of Constitutional requirements that Congress control the currency, by insisting that the Federal Reserve System is a “creature of Congress”, but its day-to-day operations are secretive and separate from elected official supervision by the President or Congress. Probably even various Federal Reserve officials at the top levels also are blindsided by each other’s deceptions, and by the consequences of their acts and omissions.

    Still, it should be said that no organization that does not control the currency of a country, can truthfully claim to be a “government” at all. Then, again, the so-called “government” of the United States and other imperialist-capitalist states, generally functions as the the executive committee of the dominant banking-corporate giant oligarchs. Not a “government”, certainly not of a “democratic republic”. Yet, it still claims a monopoly on “legitimized” violence, the definition of a state.

    • The right wing has gone so far that, late in his life, Barry Goldwater would denounce them for being too extreme! It makes you laugh, until you realize that people who are too extreme for Senator Goldwater are not only taken seriously, but setting policy and making decisions that effect everybody.

      I think you are correct in what would happen should the Postal Service be fully privatized; there would have to be a movement for “postal neutrality” on the model of the struggle for net neutrality. But even should “postal neutrality” become law under a privatization scenario, the cost of a first-class stamp would probably be at least two or three times higher than it currently is because, well, that’s what a monopoly can and does do. And undoubtedly with worse service.

      The example of New Zealand banking is instructive. Monopoly multi-national banks from Australia provided bad service, until a public option offered much better. Better to keep the U.S. Postal Service as part of the commons, which itself requires a struggle as corporate plunder and takeover of what commons remains is inextricably part of modern capitalism.

  4. Rodney says:

    While it’s true that the German Postbank is called the Postbank and has branches in the “post office”, in fact, the German post office was privatized and almost all of its locations closed and sold off. DHL owns the “post office” now. The Postbank is owned primarily (93.7%) by Deutsche Bank!!.
    https://www.postbank.com/postbank/en/au_profile_the_postbank.html
    https://www.postbank.com/postbank/en/au_history.html

    So, all those profits are getting booked to DB.

    Where I live here in Germany (the city of Halle), the Postbank shares space with the main “post office”, the only original location left. Most post office locations are now DHL/Post service desks in stationary stores, department stores, cafes or other small places, which are privately contracted out to the owners of those places.

    There is no longer any monopoly on postal service and so, for instance, the local newspaper here also delivers mail. That way you end up with as many as three deliveries of mail a day. Of course, DHL/The Post still delivers most mail.

    • Thank you, Rodney, for providing more information. I had seen the page for the first of your two links, which didn’t specify ownership, but I had not seen the second page to which your linked, which indeed reports Deutsche Bank’s ownership. Quite a shame those profits aren’t funneled back for public good, but rather to one of Germany’s biggest corporations, one that has certainly played a major role in the crashing of the global economy.

      I just hope the local newspaper that delivers mail isn’t Bild

  5. […] Dolack over at Systemic Disorder discusses the possibility of adding baking to the list of services already offered by the post office, providing a low-cost alternative to the private banking […]

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