A fascinating blog post by Diego Zuluaga at the Cato Institute, discusses what the writer calls the recent “surprising rehabilitation” of Post Office banking – the idea that the United States Postal Service (USPS) should provide payment, saving and credit services. This time, he says, it is seen as “…an ostensible solution to America’s unusually high rate of “unbanked” households.”
NILA is on the record as opposing efforts to have USPS provide small loans to unbanked households. The traditional installment loan, made from loan offices in borrowers’ communities is the best way to provide credit to those that banks will not serve. USPS is singularly unsuited to the role.
Mr. Zuluaga appears to agree with this latter point. He talks of the “strange persistence” of postal banking. He points out that four of this year’s Democratic presidential primary contenders, including President-Elect Joe Biden, have called for its revival. These people see postal banking as “…an efficient—relatively fast and inexpensive—way to bank the unbanked”.
Mr. Zuluaga’s research does not support this. Rather, he says, “…even if the USPS could develop the requisite infrastructure in short order, which is itself doubtful, postal banking would probably not be very cost-effective.”
He concludes with a statement which NILA can wholeheartedly get behind:
“Congress was right to end the postal savings system, and it should not reverse this decision more than 50 years later.”
The entire post can be read here:
Going Postal? Proposals for Post‐Office Banking in 2020 (Cato Institute)
NILA’s own Frequently Asked Questions, available on this website, address the issue of Postal Banking in a succinct but compelling way (Question 28).
SOURCE: Cato Institute
