How to Help the Struggling Post Office and the Poor: Turn USPS into a Bank…Again

Thursday, February 06, 2014
(photo: USPS)

The U.S. Postal Service continues to lose money by the billions, and no one in Washington has figured out a solution to the problem. But a new—or rather old—idea has surfaced that could receive consideration by policymakers: Turn the Postal Service back into a bank.


For more than five decades, the Post Office operated as a bank by offering low-interest savings accounts. This service, which lasted from 1911 to 1967, was discontinued after regular banks began offering higher, more competitive interest rates.


But one voice of authority, the Inspector General for the Postal Service (IG), thinks it might be time to expand the Post Office’s functions by offering financial services again.


In a new report (pdf), the IG says adding banking options could generate nearly $9 billion in new annual profits for the Postal Service. That’s nearly twice the amount of its deficit last year ($5 billion), which marked the seventh year in a row that it has operated at a net loss.


The change would entail offering savings accounts, loans and debit cards to postal customers. Low-income people could particularly benefit from the new services, the IG said, since these Americans often have to resort to banking with payday lenders and other predatory financial services that can charge nearly 400% annually in interest.


“There is a clear market need for innovative financial products, and millions of families would benefit from more affordable solutions,” the report says. “The Postal Service could be exactly what they are looking for.”


Avery Kleinman at the Project on Government Oversight noted that turning the Post Office into a bank would not require congressional approval. The president could authorize this move simply by executive order, which is precisely the kind of action President Obama espoused in his recent State of the Union address.

-Noel Brinkerhoff


To Learn More:

Could Post Offices Become Public Banks? (by Avery Kleinman, Project On Government Oversight)

Providing Non-Bank Financial Services for the Underserved (Office of Inspector General, United States Postal Service) (pdf)

Postal Savings System (Historian, United States Postal Service) (pdf)

Congress Struggles to Deliver Solution to Postal Problem It Created (by Matt Bewig, AllGov)

Manufactured Crisis About to Cripple the Post Office (by Noel Brinkerhoff, AllGov)


Cass Martinez 5 years ago
Dear Mr. Brinkerhoff, In a story you wrote for AllGov in 2011 you noted that the 75-yesr pre-pay of USPS retirement benefits (covering people not yet hired--and not yet born, may I add) was legislated by Congress and is responsible for the shortfall you describe.
Al D 6 years ago
Where's the money going?? Evidently according to the news yesterday, to buy ammo.

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