The Roosevelt Institute–named for FDR–has a project it calls “the next New Deal.” One of its recommendations takes a hard look at a proposal that has been floating around for a while–allowing the Post Office to offer banking services.
Banks today are increasingly consolidating branch locations, while also moving away from low-cost financial services to high-profit activities, leaving marginalized Americans underserved and left behind in today’s economy. Without access to basic banking services, such as checking and savings accounts or small loans, consumers are vulnerable to a host of financial abuses. To foster a more inclusive and accessible economy and society for all communities in the U.S., the public provision of banking goods and services by the government is an important— and bold—option to consider. In a new report co-published with the Samuel DuBois Cook Center on Social Equity at Duke University, Thomas Herndon and Mark Paul argue for the public provision of household financial services.
Among the referenced “host of abuses” are payday lenders and other predatory operations, offering money to people who are desperate for cash to meet a pressing and/or unexpected need at obscene rates of interest.
Allowing the Post Office to offer banking services would make those services available in locations that bank branches no longer serve, and would allow people with very limited means to access basic financial tools that most of us take for granted: checking and savings accounts, check cashing services, and the ability to have direct deposit for Social Security and payroll checks. The Post Office would also lend money–at reasonable rates–via small loans, auto loans, and mortgages.
As I noted, adding banking to the services the Post Office currently provides has been proposed before. I always thought it was a good idea (although for some reason, the banks disagreed….)The Roosevelt proposal, however, adds an interesting argument to the case for Postal banking, one I had not previously encountered.
Roosevelt’s proposal for banking through the Postal Service argues that in addition to serving a growing public need, having a public bank would allow the federal government to monitor and manage the country’s online financial services marketplace.
This second component would serve as a powerful regulatory tool by allowing the government to condition sellers’ access to the marketplace based on certain consumer safety standards. Consumers could also rate and review sellers, fostering easier detection of consumer abuses. A public banking option structured with these two components would create the financial infrastructure required for universal service, while also preventing consumer financial protection abuses through public-private competition.
If we had an administration and Congress that was operating in the public interest, this proposal would at the very least get serious consideration. But of course, we don’t have a functioning government right now, let alone people in public office to whom we might affix the label “statesmen.”