Yes, but that means you're saying the USPS has some kind of advantage locating where there are disproportionate unbanked and also a dearth of banks. But I keep hearing about the unbanked as being an issue of large urban areas, which don't have any shortage of bank locations.
So for these five or six people in rural areas that can't get a bank account, and aren't complete deadbeats, and can't get to a bank as easily as they can get to a post office, the USPS has a cost advantage in serving them. Okay. I just don't see numbers that make this a big source of free money.
USPS isn't a company, it's a government department which provides a public service (deliver mail at very low prices). Because the USPS has so many branches all over the country, many people (myself included) think it would be a good idea to also offer banking services and so that the unbanked can become banked. Even just a basic checking account would mean people don't have to pay check-cashing fees anymore.
The USPS is a government agency that already has physical branches in almost every community in the US, which would make it an extremely accessible bank for the 4.5% or so of households who currently don't have a bank.
It could also be pressure on American banks to treat their customers better, since the USPS is not burdened with a responsibility to generate dividends for shareholders.
The USPS is also not directly funded by taxes (though it is indirectly subsidized via it's tax status and sole right of access to mailboxes), and with the waning popularity of letter mail, would become more self sufficient in the long term if it branched out into other services
Other countries also combine banking and postal branches for similar reasons, like Japan (although it is in the process of being privatized).
In many countries, this limited bank runs out of the post office. TBH, that isn't a terrible idea for the US. It would shore up the USPS, which primarily makes money by delivering junk mail, and it provides lower cost banking for those who would wind up paying check cashing fees.
I don't know of any study showing they are more efficient, but if they were, they would achive that efficiency by refusing to serve difficult markets. As part of their charter, USPS provides coverage to remote and rural areas that can't be easily served and that private services neglect.
Also, the USPS has had potentially businesss-killing policies legislated into their finances by a hostile Congress, like requring pensions to be pre-funded seventy-five years in advance over a ten-year period.
That's not to say the Post Office is as efficient as it could be. But the services it offers (e.g., bank substitute in impoverished neighborhoods for check cashing/money orders, not to mention significant employer) are vital to American small businesses and communities.
It’s a more practical solution to the problem. At the fringes of society, USPS is a closer to being an equitable and accessible bank than Wells Fargo is. Even if you did require Wells Fargo to serve unprofitable customers, they’re still not going to build a branch in the underserved areas where these services are needed.
Equitability will always be at odds with the profit motive of commercial banks. If anything, requiring banks to offer unprofitable services might just lead to more branches closing to avoid the losses.
There’s a reason you can’t send a letter for $0.55 via FedEx or UPS.
USPS should get into at-cost banking. There's no reason there should be any underbanked persons without a no-fee ATM/debit card, savings account, and check cashing services.
It cost money to run and the customer base pulled its funds in favor of better choices.
The goal of a postal bank is often framed in terms of a source of revenue for the USPS. Examples include in this very thread. If there's no expectation of net-positive revenue, then there needs to be a different justification for why the post office should spend money to offer everyone banking service inevitably inferior to the private sector. Plus, now you have all the politics that come with a subsidized service and paying for it. If it can pay for itself, it's much simpler.
Postal banking is often advanced as an idea for a public service that will eat Wall Street's lunch to the benefit of all. We should be at least a bit skeptical of the unvarnished optimism of that. Further, I think that if we're going to seriously discuss the topic we need to grapple seriously with why the US doesn't have one anymore.
"It's obviously possible to NOT lose money delivering much more difficult things than paper. FedEx and UPS do it all the time. But they're private businesses who compete with each other (and Amazon and whoever else), so they have to figure it out or they won't be around."
They also do not have the requirements to serve the entire country, and they do not have the bonkers pension requirements placed on them like the USPS does.
"The USPS, meanwhile, doesn't have to compete with anyone (in fact, it's illegal for anyone else to deliver mail) and has no incentive or need to be efficient because they can draw on the US Treasury whenever they need to. It's not that they're bad people, it's just the nature of the incentives and system involved (and also it's run by congress). These same dynamic would be there in banking though, which is why this seems like such a bad idea."
I don't think it's a given that just because no one else finds it profitable means that the USPS couldn't operate it in a profitable way.
Most of the reasons that it isn't profitable relate to problems that the USPS already has to solve as part of their core function. It doesn't make sense for a bank to invest in physical infrastructure in the middle of nowhere, the cost of the building would erase any potential profit. The post office already has a building there though (and staff, etc). A significant amount of the up front expense, as well as a decent chunk of the ongoing expenses, is already going to be spent anyway.
It's an interesting question. Obviously the money has to come from somewhere. Mail trucks cost money, and no one is going to go out and deliver letters for free. It's easy to say we should just make up the difference with tax reciepts like we are now.
I think it's less a philosophical question -- is mail like roads or police? -- vs a matter of efficiency. It's obviously possible to NOT lose money delivering much more difficult things than paper. FedEx and UPS do it all the time. But they're private businesses who compete with each other (and Amazon and whoever else), so they have to figure it out or they won't be around.
The USPS, meanwhile, doesn't have to compete with anyone (in fact, it's illegal for anyone else to deliver mail) and has no incentive or need to be efficient because they can draw on the US Treasury whenever they need to. It's not that they're bad people, it's just the nature of the incentives and system involved (and also it's run by congress). These same dynamic would be there in banking though, which is why this seems like such a bad idea.
The main reason for the USPS is coverage. The US has a whole lot of sparsely populated, but not unpopulated, land. Covering these people is part of what makes the USPS unprofitable.
The same problem exists for telephones but the main approach has been to set high minimum prices that non-rural carriers have to pay rural carriers for traffic flowing from the former to the latter. This enables the rural providers to make a profit but leads to unintended consequences like free conference call companies set up in rural areas which get a kick back from the local provider for the incoming traffic they engender.
In the US excited to see USPS head towards once again providing banking services to the underbanked [1] this was something very convenient in the UK [2]
What's concerning is that in order to offer FedAccounts, the particular postal office has to partner with a bank. Does this mean if you go to a post office in another area you won't be able to access your account? With the prevalence of online banking, do the already busy USPS offices really need to be a retail location for a bank?
Why can't the USPS just offer these services themselves? Especially since the bill reimburses member banks for operating costs related to FedAccounts. Might as well cut out the middleman.
In my original comment, I was not arguing about the reasons why USPS doesn't make money. The author suggested that USPS is cheap and that is incorrect because USPS 'feels' cheap only because government takes care of the losses. BTW, correction for my previous post, USPS lost 7 billion dollars in 2008. Link: http://thehill.com/leading-the-news/gao-postal-service-in-fi...
Coming back to your argument about the constraints USPS has to deal with. If you really think that USPS is losing money because they have to serve every single residential address in America, you are not being honest. By law, USPS has the monopoly to deliver first class mail, UPS/FedEx are not allowed to deliver them. If you really open up the market and let UPS/FedEx compete in the market, I am sure they will deliver better service for even cheaper prices. Link: http://www.jhhuebert.addr.com/articles/stamp.html
Yes, you may not be able to send a mail from NYC to SFO for 45 cents but it was wrong for cross country mail to be so cheap in the first place. I hardly use USPS but I have to pay my taxes every year and in turn I am subsidizing folks who are trying to send cross country mail for 45 cents. A private competitor will make sure that you pay the appropriate amount for your mail. It will be super cheap (may be even less than 45 cents) if the sender and receiver are in the same state! (And yes, UPS/FedEx will deliver to any address in America but you better pony up the cash if you are sending mail to middle of nowhere in Alabama.) Bottom line: price should reflect the cost, not pass it over to the taxpayers.
Also, did you know that USPS pays no taxes? No fuel taxes, no sales taxes, no property taxes, no corporate taxes, etc. Imagine what FEDEX and UPS could offer consumers in pricing & service if they were tax exempt like the USPS. Did you know that USPS makes most of its money from all the junk mail it delivers? There was a legislation on 'Do not Mail' registry (very similar to 'Do not Call' registry) and USPS is opposing it as without direct mail USPS will be in even bigger hole. So all those junk mails are essentially subsidizing your postal cost.
The other day I was in post office and there was a guy who was 2 years short of the retirement and he was making 50,000$/year. Guess what he did? He sold stamps behind the counter. You can hire people to do his job for 7 to 8 dollars per hour but because of Union/labor laws, he makes 50,000$. How is that for efficiency?
Right, and that exposes the reality that the USPS is at best, a state run subsidization scheme for rural mail delivery. But if that's the case, why subsidize it indirectly through selectively inflated prices, which regressively hurt poor people in urban markets)?
Sounds like if the problem is that rural mail is socially important, we ought to subsidize it directly.
Why wouldn't the USPS just be a bank, with accounts with the Fed and FDIC insurance though? The USPS not providing banking services is because Congress won't let it.
Because physical logistics are labor and capital intensive, whereas banking is not. USPS can deliver banking services in a financially sound manner without needing to generate a profit from it.
Ellen Brown's article, "What We Could Do with a Postal Savings Bank: Infrastructure that Doesn’t Cost Taxpayers a Dime" [1], advocates for allowing the post office to expand its banking services.
I send postal money orders some times - these can be cashed at any post office.
So for these five or six people in rural areas that can't get a bank account, and aren't complete deadbeats, and can't get to a bank as easily as they can get to a post office, the USPS has a cost advantage in serving them. Okay. I just don't see numbers that make this a big source of free money.
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