Bernie Sanders's Highly Sensible Plan to Turn Post Offices Into Banks

http://www.theatlantic.com/business/archive/2015/10/bernie-sanders-lets-turn-post-offices-into-banks/411589/

They're much less crazy than payday-lending services, and the rest of the world agrees.

In an interview with Fusion’s Felix Salmon the day after last week’s Democratic debate and published Tuesday, Senator Bernie Sanders discussed the marquee features of democratic socialism he’s been tirelessly calling for during his presidential campaign: higher taxes for the wealthiest Americans, an increased minimum wage, and breaking up the biggest Wall Street banks.

Salmon also raised a possibility that has not been as prominent in Sanders’s stump speeches, but animates him nonetheless: turning the U.S.’s post offices into banks. Sanders:

If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off. And, yes, I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it.

It’s something Sanders alluded to in a 2014 Wall Street Journal op-ed, and it’s not even the craziest idea proposed to save the USPS—a report last year explored the implications of turning post offices into hubs for 3-D printing.

In fact, Sanders’s idea is quite sensible. “Postal banking”—which just means that post offices run savings accounts, cash checks, and perform other basic financial services—is common in most of Asia and Europe, and only about 7 percent of the world’s national postal systems don’t offer some bank-like services. Postal banking is a really good way to reach people who haven’t had access to standard savings accounts. One estimate figures that more than 1 billion people have used post offices for making deposits.

The reason why this would be so useful in the U.S. is that somewhere between 20 and 40 percent of the population has to rely on check-cashing or payday-lending services, which in some places charge usurious rates that send people into spirals of recurring debt. Mehrsa Baradaran, a professor at the University of Georgia School of Law and the author of How the Other Half Banks, touched on the promise of postal banking in a book excerpt published in The Atlantic last week:

The basic idea of modern postal banking is a public bank offering a wide range of transaction services, including financial transactions, remittance, savings accounts, and small lending. These institutions would remain affordable because of economies of scale and because of the existing postal infrastructure in the U.S. Plus, in the absence of shareholders, they would not be driven to seek profits and could sell services at cost.

In her essay, Baradaran made the point that the Federal Reserve helps struggling banks through temporary credit crunches—so why doesn’t the government treat struggling individuals the same way? It’s not unheard of in the U.S.; in 1910, William Howard Taft introduced a postal-savings system for new immigrants and the poor that lasted until 1967. Today, it’d be a huge relief for people without access to banks, with an added bonus: It’d give the U.S. a leg up on Denmark, the nation that both Sanders and Hillary Clinton professed love for in the debate and which doesn’t currently have postal accounts.