Representative Alexandria Ocasio-Cortez and Senator Bernie Sanders just put postal banking back where it belongs: high on the agenda of those who seek to create a just and equitable United States. On Thursday, the pair drew national attention with the announcement of their Loan Shark Prevention Act, a sweeping plan to “combat the predatory lending practices of America’s big banks and protect consumers who are burdened with exorbitant credit-card interest rates. The legislation imposes a 15 percent federal cap on interest rates and empowers individual states to establish lower limits.”
The CEOs of the banking behemoths that have enjoyed a free ride under Republican and Democratic administrations were, undoubtedly, shaken by the progressive populist clarity of the measure. Sanders named names:
The reality is that today’s modern-day loan sharks are no longer lurking on street corners breaking kneecaps to collect their payments. They wear three-piece suits and work on Wall Street, where they make hundreds of millions in total compensation and head financial institutions like JPMorgan Chase, Citigroup, Bank of America and American Express.
But what unsettled conservative champions of the banking interests was a parallel proposal by Sanders and Ocasio-Cortez “to build and expand basic post office banking services as an accessible, affordable alternative to check-cashing and payday-lending businesses.”
“Post offices exist in almost every community in our country. There are more than 31,000 retail post offices in this country. An important way to provide decent banking opportunities for low-income communities is to allow the US Postal Service to engage in basic banking services,” explained the proposal. “The Postal Service already cashes Treasury checks and issues money orders. The USPS should fully exercise its existing statutory authority and implement pilot programs offering affordable financial services, including ATMs, paycheck cashing, bill payment and electronic money transfers in post offices.”
Responding to a serious challenge—according to a 2015 study by the Postal Service’s Office of the Inspector General, roughly 68 million Americans are underserved by the private banking system—Ocasio-Cortez said that “we should have a not-for-profit public option for basic banking services, and we should be piloting these projects through the US Postal Service, or any other number of ways.”
Sean Hannity could not handle it. He mocked the idea on Twitter and a headline on his website decried, “‘POSTAL BANKING’? AOC, Bernie Call for the Creation of Government-Owned Banks Run by the US Post Office.” Hannity was not alone. The right exploded with fury over the notion of a public alternative to private banking. Predictably, along with right-wing members of Congress, conservative media went into attack mode, trafficking in stereotypes, fantasies, and outright lies about the efficiency of postal workers in particular and government employees in general.
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“Ocasio-Cortez’s proposal is another example of a Democratic idea that places high levels of faith in the federal government to manage an important industry, such as banking or health care, more efficiently than private companies, despite significant evidence that the government doesn’t do much of anything very efficiently,” fretted Glenn Beck’s The Blaze.
Actually, the government manages a lot of “important industries” and human priorities well—and the people know this. That’s why Paul Ryan could never enact his schemes to begin privatizing Social Security, Medicare, and Medicaid.
What’s more, Americans love the USPS. According to the Pew Research Center’s How Americans View Their Government survey, the Post Office has in recent years been the most favorably viewed of all federal departments. The National Postal Mail Handlers Union likes to remind us that the Pew survey found that “the United States Postal Service was ranked as the most favorable federal agency with an 84% approval rating while only 14% expressed an unfavorable view of the agency.”
Postal banking is not a new idea. From 1911 to 1967, the Postal Service maintained its own banking system, allowing citizens to open small savings accounts at local post offices—actually a better approach than “partnering” with banks. The system was so successful that, after World War II, it had a balance of $3 billion, roughly $30 billion in today’s dollars. Congress did away with postal banking in the 1960s, but post offices in other countries—including Japan, Germany, China, and South Korea—provide banking services. Japan Post Bank is consistently ranked as one of the world’s largest financial institutions based on assets.
That common understanding of the usefulness of postal banking should be restored in the United States. It is best outlined in a United Nations Department of Economic and Social Affairs discussion paper, which observes, “The essential characteristic distinguishing postal financial services from the private banking sector is the obligation and capacity of the postal system to serve the entire spectrum of the national population, unlike conventional private banks, which allocate their institutional resources to service the sectors of the population they deem most profitable.”
When The Nation started writing about postal banking in 2010, the National League of Postmasters was toying with the idea, as were policy analysts who recognized that a public or quasi-public alternative to big banking could provide financial security for millions of Americans. It would also avoid investing entanglements that foster indebtedness to foreign governments and financial institutions, and perhaps create a way to fund public assets such as sewer systems and bridges.
Postal banking has since gained traction with postal unions, which have been fighting to save the USPS—both by easing irresponsible congressional requirements for prepayment of retiree benefits 75 years into the future and by expanding the range of services that post offices provide. Back in 2012, delegates to the National Association of Letter Carriers convention backed a resolution that declared, “A USPS bank would offer a ‘public option’ for banking.”
Despite what the knee-jerk anti-government echo chamber may tell you, the Postal Service is a national treasure. It exists to serve Americans. And what Americans need now is banking that serves people, not the Wall Street speculators. American Postal Workers Union president Mark Dimondstein is absolutely right when he says that the USPS can and should answer the call with “a nonprofit alternative to the big banks” that “would give the working poor an alternative to the legal loan-sharking they are now victimized by. It also would provide another source of revenue.”
