A “Public Option” for Banking
It’s time to stop relying on the big banks and predatory lenders, and expand access to fair consumer banking services through “a public option” like postal banking and public banks.
Nearly 28 percent of U.S. households rely on fringe financial institutions for banking and credit services, which are often provided on predatory terms. Fees paid to payday lenders and check-cashers cost these households an astonishing $89 billion a year. That’s more than $2,400 per household– nearly 10 percent of their average income. These predatory services are concentrated in low-income neighborhoods and in communities of color, stripping additional wealth from those who can least afford it.
Regulating abusive and aggressively marketed products is important; but much more needs to be done to broaden access to high-quality, low-cost financial services. The U.S. Postal Service (USPS) is well placed to provide such basic banking services. In past decades, the USPS offered savings accounts on a significant scale, and postal systems in countries around the world currently provide financial services to more than a billion consumers.
The Postal Service is geographically well-positioned to reach people with little or no access to retail banking. Increasingly, banks are closing branches, particularly in low-income communities. The USPS has more than 31,000 branches serving every urban, suburban, and rural community in the country. Fifty-nine percent of post offices are in zip codes with either no bank or only one bank.
The USPS is legally required to serve all Americans, regardless of geography, at uniform price and quality. Its nonprofit, universal mandate contrasts sharply with exorbitantly-priced financial services that target vulnerable communities.
The USPS already offers some very limited financial products, including the sale of money orders, international money transfers to nine countries, and cashing of U.S. Treasury checks. The Postmaster General, with the approval of the Postal Regulatory Commission, can take action under the Postal Service’s existing authority to offer more basic banking services, including:
- Low-cost ATMs with free access for Treasury Direct Express cards, providing Social Security benefits at no cost;
- Electronic money transfers to other U.S. post offices and more foreign countries
- Cashing paychecks; and
- Bill payment services, allowing the unbanked to make fast, convenient payments for utilities and other essential services.
- Pilot projects could explore additional products offerings.
“Kirsten Gillibrand Unveils Her Ambitious Plan to Turn the Post Office Into a Bank,” by Jordan Weissman, Slate, July 30, 2018.
“Kirsten Gillibrand Unveils a Public Option for Banking: The idea would provide a low-cost alternative to payday loans — and it might just save the Postal Service, too.” by Daniel Marans, Huffington Post, April 26, 2018.
“Postal Banking is back on the table. Here’s why that matters.” by Kevin Wack, American Banker, April 26, 2018.
“Postal Banking Worked—Let’s Bring It Back: Regulated, federally subsidized banks serve the wealthy and the middle class. A Wild West hodgepodge of unregulated lenders serves everybody else.” by Mehrsa Baradaran, The Nation, January 7, 2016.
Campaign for Postal Banking is a coalition of consumer, worker, financial reform, economic justice, community, civic, and faith-based organizations building a campaign-based movement to inform and mobilize the public to call on the United States Postal Service to take the necessary steps to restore and expand postal banking at its branches across the country.
The US Mail Not for Sale is a worker-led campaign sponsored by the American Postal Workers Union and the National Association of Letter Carriers. The campaign brings together labor unions, elected officials, member organizations of A Grand Alliance to Save Our Public Postal Service, community supporters and the public to fight plans to sell the public Postal Service to the highest bidder.
A public bank is owned by people through a city or state and takes deposits, for example from tax revenues. The bank then reinvests its profits back into that community. Whereas investor profits are the top priority for private banks, citizens can exercise oversight over a public bank’s practices. Public banks can save municipalities and states money, create jobs and boost the local economy, and lend counter-cyclically to blunt the impact of Wall Street booms and busts. As the Public Banking Institute puts it, public banks “allow communities to declare their independence from risky, expensive, for-profit banks, and keeps taxpayers’ money working at home.”
“Why Public Banks Are Suddenly Popular: There’s only one in America—in North Dakota. But a growing movement is pushing for them across America, from L.A. to D.C.,” by Sarah Jones, The New Republic, August 10, 2018.
Our mission is to inspire, enable, and support Public Bank initiatives, returning control of money and credit to states and communities. Our vision is that a network of publicly-owned banks will be established that create affordable credit and allow communities to declare independence from Wall Street’s high-risk, expensive, unaccountable private banking system. Our goal: 5 by 2020! We hope to have five Public Banks well on their way to reality by 2020 and for people everywhere to understand how public banking can benefit them.
The Public Bank NYC Coalition believes public money should work for the public good, not private gain. We are pressing for the creation of a public bank for NYC, as part of a broader vision for economic and racial justice. We believe a public bank, with a clear mission to serve critical neighborhood needs, will help achieve economic security and shared prosperity for all New Yorkers. Through direct actions, political advocacy and other joint efforts we will make this dream a reality!
Los Angeles manages more than five billion dollars in annual revenue collected from tax, fee and fine payers. The city maintains bank accounts with between $4B and $12B in cash, and manages up to $45B in investments for pensions and other funds. That money is currently held in accounts at commercial banks, where it earns next to zero interest. We can and must take back this money power for the people of the city.