An idea floated last month by the Inspector General of the U.S. Post Office, to solve the agency’s money problems by allowing it to get into the financial services business, appears to be catching on.
The idea got a ringing endorsement from Massachusetts Senator Elizabeth Warren earlier this month. In an article published by the Huffington Post, Warren, who serves on the Senate Banking Committee, wrote, “If the Postal Service offered basic banking services - nothing fancy, just basic bill paying, check cashing and small dollar loans – then it could provide affordable financial services for underserved families, and, at the same time, shore up its own financial footing.”
Warren’s endorsement was followed this week by a poll showing that the idea has broad public support, with 74 percent of 1,000 adults surveyed reporting that they had at least a “somewhat favorable” opinion of the idea.
The idea put forward in a report by the Inspector General doesn’t envision the post office literally becoming a bank – as in getting a charter from a bank regulatory agency and offering FDIC-insured deposits. However, in order to offer many bank-like services, including check cashing, bill payment, and loans, the post office wouldn’t need one.
Retail giant Wal-Mart runs a booming business in financial services without a bank charter. Customers can go to a Wal-Mart to pay their bills, cash a paycheck, load up a prepaid debit card, and send money around the world and more.
And, like Wal-Mart, the post office is ubiquitous. There is a post office facility in virtually every town in the country – something that can’t be said about bank branches.
Bankers have been loudly criticizing the post office proposal, but the fact is that the customers likely to use the services of a postal bank are probably not major consumers of banking products in the first place. The real target audience for the post office is the so-called “unbanked,” people who have no connection to a traditional bank. They rely, instead, on high-fee storefront check-cashing operations for many payment services, and on usurious payday lending operations for their credit needs.
Nonetheless, representatives of the banking industry are not thrilled with the proposal.
Consumer Bankers Association president Richard Hunt told industry trade newspaper American Banker, “This would be like the banking industry moving into running the airlines."
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