FacebookTwitterGoogle+RedditEmail

Providing Low-Cost Banking by Saving the Post Office

The struggle to save the United States Postal Service is emblematic of the larger struggle against corporate plundering of public resources. Reversing the intentional bankrupting of the post office requires not only a movement of allies that a new union leadership has begun to assemble, it potentially also merges with creating a public banking option.

What does banking have to do with delivering the mail? Nothing, today. But in the future? A Postal Service bank — a model that is successful in several countries around the world — would not only provide the post office with a reliable source of income, it would provide badly needed basic, inexpensive banking services for under-served populations.

Such an idea is not necessarily controversial. Despite the management of the U.S. Postal Service supporting privatization measures for many years, its office of the inspector general quietly issued a paper a year ago in which it said offering financial services could provide almost US$9 billion per year in new revenue while providing badly needed services to tens of millions of under-served people who are currently at the mercy of predatory “pay-day lenders” and other high-interest usurers.

The basis for this estimate is that “people trying to make it paycheck to paycheck” spend an estimated $89 billion per year on interest and fees on alternative financial services; the paper’s revenue estimate is based on the Postal Service, by offering low-cost services, capturing 10 percent of what is currently spent on those businesses. But the Postal Service inspector general’s office went out of its way not to upset bankers, watering down its proposal to a “partner[ship] with banks and other [mainstream] financial institutions” to “create a ‘win-win’ situation.”

If big commercial banks are winning, the rest of us will be losing. Rather than floating fantasies of swimming with ever-hungry financial sharks who are never satiated, thereby disemboweling your own idea, why not set up an independent postal bank? Doing so is precisely what the new president of the American Postal Workers Union, Mark Dimondstein, proposes. He says:

“Services such as basic, non-profit banking would be a great and real benefit to the people of this country, and a good answer to what I call ‘the Wall Street Banksters,’ who devastated the economy and with it the lives of millions of people.”

More than one-third of U.S. post offices are located in ZIP codes where no bank is located; another 20 percent are located in areas with only one bank. Providing low-cost services would help tens of millions struggling to survive financially avoid the trap of “pay-day lenders” who charge an effective annual interest rate of 391 percent, according to the inspector general paper. A typical “pay-day” loan of $395 costs the borrower an average of $520 in interest and fees on top of the principal.

Postal banking already a success

Countries as varied as Germany, Japan and New Zealand have successful postal banking services. The Japan Post Bank is the country’s largest holder of personal savings.

For more than a century, what is now known as the Japan Post Bank accepted deposits but did not lend, instead handing deposits to the Ministry of Finance, which used the funds to finance public-works projects. In 2001, the bank began direct lending instead of sending its deposits to the ministry. But this was accompanied by a privatization scheme. That scheme was halted in 2009, and has not been re-instituted despite the return of the conservative Liberal Democratic Party that originally pushed for the privatization. The bank would be a huge prize for private bankers, as it reported net income of ¥355 billion (US$3.0 billion) for its fiscal year 2014.

Germany’s Postbank is also highly profitable, reporting fiscal-year 2014 earnings of €431 million (US$473 million). The bank specializes in providing “simple, low-cost products for day-to-day needs,” and says it has 14 million clients, including more than 300,000 small and mid-sized companies.

New Zealand’s Kiwibank was founded in 2002. Big Australian banks had controlled 80 percent of New Zealand’s retail banking, and those multi-nationals were quick to close less profitable branches. To provide financial services to underserved communities, and keep capital at home for local investment, the New Zealand government established Kiwibank as a subsidiary of New Zealand Post, putting its branches in post offices. The results were swift, reports public-banking advocate Ellen Brown:

“Suddenly, New Zealanders had a choice in banking. In an early ‘move your money’ campaign, they voted with their feet. In an island nation of only 4 million people, in its first five years Kiwibank attracted 500,000 customers away from the big banks. It consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.”

Kiwibank reported net income of NZ$100 million (US$76 million) for its fiscal year 2014. The bank reports it now has 860,000 customers.

The Republican assault on the U.S. post office

Although offering basic banking services would boost revenue for the U.S. Postal Service, it would currently be on stable financial foundations were it not for a Republican plan signed into law in 2006 requiring the Postal Service to pre-fund its pension costs for the next 75 years in only 10 years. No private business could or would do such a thing. The results are what would be expected: In the last four years before the pre-funding requirement (2003 to 2006), the Postal Service had a composite profit of US$9.3 billion; it has had massive losses ever since.

It is true that the volume handled by the post office has declined in recent years with the rise of the Internet. Setting up a postal banking system would offset the resulting fall in revenue. But rather than expand services to provide a sounder foundation, corporate ideology, promoted by those with a vested interest, is instead causing a push for the dismantling of the Postal Service and the privatization of its delivery services.

For example, a study by a “think tank” calling itself the National Academy of Public Administration prepared a report that called for a near total privatization of the post office. Two of the four authors had direct interests in privatization and a third has worked for a series of Right-wing extremist “think tanks” that consistently demand the privatization of everything in the public domain. The major funder of the study was Pitney Bowes Inc., which stands to directly benefit; it already earns billions of dollars from its mail-processing facilities and would be in a good position to grab much of the Postal Service’s business.

FedEx Corp. and United Parcel Service Inc., the two largest U.S. private delivery services, also stand to benefit from the destruction of the Postal Service. Both companies employ large fleets of lobbyists and are heavy donors to members of Congress.

Heavy pressure to close post offices and mail-sorting facilities is part of the privatization drive. But the limited research done on closings indicates that closings actually cost more than the savings generated. A study conducted by University of Wisconsin studentsexamined what would happen if one of the seven post offices in a rural Wisconsin county were closed. The study found that the Postal Service would save $560,000 over seven years by closing a post office but the added costs from residents forced to drive further to access a post office would be $1.3 million over seven years. Thus, the overall cost to the community would be more than $700,000.

Another example of the costs to small communities can be found in the small community of Prairie City, South Dakota. Closing the post office there saved $19,000. The nearest hospital and pharmacy is 40 miles away, and when medicine was needed in Prairie City, the pharmacist 40 miles away would hand it to the mail carrier for same-day delivery. Now medicine deliveries take two to three days, an article in Naked Capitalism reports. What is the price of a life that might be compromised because of this delay?

Vowing a new militancy

A slate of local officials pledged to mount much more militant tactics swept into the leadership of the American Postal Workers Union last fall, winning seven of nine contested seats. Union President Dimondstein, elected with this group, said he seeks a “cultural shift”to an organizing model of unionism from a service model. In an interview with Socialist Worker, he said:

“People are disengaged not because they don’t care but because they see their union dues as a premium to an insurance company or as lawyer’s fees. We need to retool, to retrain people to see the union as themselves. We need to encourage workers to take their grievances directly to the boss, in groups, not just file paperwork and wait for union officials to service them. We need more of a movement, a sense of connection to the larger community which will give postal workers hope and confidence.”

That postal workers are in a position to negotiate is because they defied their union leadership in 1970 to engage in an illegal strike that spread across the country to more than 30 major cities — an example praised by the new American Postal Workers Union leadership. The union, one of four that represent postal workers, began talks on a new contract in February, vowing to end a disastrous three-tiered contact negotiated by previous union leaders. That contract calls for reduced pay for new hires and allows people working only 30 hours a week to be considered “full time.”

At the opening session of the contract talks, the American Postal Workers Union leadership was joined by the president of the National Association of Letter Carriers, Fredic Rolando, in a signal that the postal workers won’t be divided by job description. (The APWU represents clerks, drivers and maintenance workers.) The APWU said it would not only negotiate better pay, but “will be putting forth proposals for maintaining overnight delivery standards, halting plant closings, expanding hours of service and staffing for the customers, and providing financial services such as postal banking.”

To back their new militancy, postal unions have formed an alliance with several dozen labor and advocacy groups called A Grand Alliance to Save Our Public Postal Service. The alliance vows that “The public good must not be sacrificed for the sake of private investment and profit.”

No one group or organization can turn the tide against neoliberalism, but an organized fightback must begin somewhere by someone. If there is going to be serious follow-through on all these initiatives, a dramatic departure from the methodologies of U.S. unions of recent decades would be a welcome start — although this can’t be effective without broad popular support and activity capable of solidarity work and overturning anti-union laws such as Taft-Hartley.

Reforms, however welcome, can only achieve so much and are always temporary. Struggles for reform will be fought again and again, becoming more difficult to sustain, as long as economic systems stress private profit rather than public good.

Pete Dolack writes the Systemic Disorder blog. He has been an activist with several groups.

More articles by:

Pete Dolack writes the Systemic Disorder blog and has been an activist with several groups. His book, It’s Not Over: Learning From the Socialist Experiment, is available from Zero Books.

Weekend Edition
November 16, 2018
Friday - Sunday
Jonah Raskin
A California Jew in a Time of Anti-Semitism
Andrew Levine
Whither the Melting Pot?
Joshua Frank
Climate Change and Wildfires: The New Western Travesty
Nick Pemberton
The Revolution’s Here, Please Excuse Me While I Laugh
T.J. Coles
Israel Cannot Use Violent Self-Defense While Occupying Gaza
Rob Urie
Nuclear Weapons are a Nightmare Made in America
Paul Street
Barack von Obamenburg, Herr Donald, and Big Capitalist Hypocrisy: On How Fascism Happens
Jeffrey St. Clair
Roaming Charges: Fire is Sweeping Our Very Streets Today
Aidan O'Brien
Ireland’s New President, Other European Fools and the Abyss 
Pete Dolack
“Winners” in Amazon Sweepstakes Sure to be the Losers
Richard Eskow
Amazon, Go Home! Billions for Working People, But Not One Cent For Tribute
Ramzy Baroud
In Breach of Human Rights, Netanyahu Supports the Death Penalty against Palestinians
Brian Terrell
Ending the War in Yemen- Congressional Resolution is Not Enough!
John Laforge
Woolsey Fire Burns Toxic Santa Susana Reactor Site
Ralph Nader
The War Over Words: Republicans Easily Defeat the Democrats
M. G. Piety
Reading Plato in the Time of the Oligarchs
Rafael Correa
Ecuador’s Soft Coup and Political Persecution
Brian Cloughley
Aid Projects Can Work, But Not “Head-Smacking Stupid Ones”
David Swanson
A Tale of Two Marines
Robert Fantina
Democrats and the Mid-Term Elections
Joseph Flatley
The Fascist Creep: How Conspiracy Theories and an Unhinged President Created an Anti-Semitic Terrorist
Joseph Natoli
Twitter: Fast Track to the Id
William Hawes
Baselines for Activism: Brecht’s Stance, the New Science, and Planting Seeds
Bob Wing
Toward Racial Justice and a Third Reconstruction
Ron Jacobs
Hunter S. Thompson: Chronicling the Republic’s Fall
Oscar Gonzalez
Stan Lee and a Barrio Kid
Jack Rasmus
Election 2018 and the Unraveling of America
Sam Pizzigati
The Democrats Won Big, But Will They Go Bold?
Yves Engler
Canada and Saudi Arabia: Friends or Enemies?
Cesar Chelala
Can El Paso be a Model for Healing?
Mike Ferner
The Tragically Misnamed Paris Peace Conference
Barry Lando
Trump’s Enablers: Appalling Parallels
Ariel Dorfman
The Boy Who Taught Me About War and Peace
Binoy Kampmark
The Disgruntled Former Prime Minister
Faisal Khan
Is Dubai Really a Destination of Choice?
Arnold August
The Importance of Néstor García Iturbe, Cuban Intellectual
James Munson
An Indecisive War To End All Wars, I Mean the Midterm Elections
Nyla Ali Khan
Women as Repositories of Communal Values and Cultural Traditions
Dan Bacher
Judge Orders Moratorium on Offshore Fracking in Federal Waters off California
Christopher Brauchli
When Depravity Wins
Robby Sherwin
Here’s an Idea
Susan Block
Cucks, Cuckolding and Campaign Management
Louis Proyect
The Mafia and the Class Struggle (Part Two)
David Yearsley
Smoke on the Water: Jazz in San Francisco
Elliot Sperber
All of Those Bezos
FacebookTwitterGoogle+RedditEmail