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.

January 16, 2019
Patrick Bond
Jim Yong Kim’s Mixed Messages to the World Bank and the World
John Grant
Joe Biden, Crime Fighter from Hell
Alvaro Huerta
Brief History Notes on Mexican Immigration to the U.S.
Kenneth Surin
A Great Speaker of the UK’s House of Commons
Elizabeth Henderson
Why Sustainable Agriculture Should Support a Green New Deal
Binoy Kampmark
Trump, Bolton and the Syrian Confusion
Jeff Mackler
Trump’s Syria Exit Tweet Provokes Washington Panic
Barbara Nimri Aziz
How Long Can Nepal Blame Others for Its Woes?
Glenn Sacks
LA Teachers’ Strike: When Just One Man Says, “No”
Cesar Chelala
Violence Against Women: A Pandemic No Longer Hidden
Kim C. Domenico
To Make a Vineyard of the Curse: Fate, Fatalism and Freedom
Dave Lindorff
Criminalizing BDS Trashes Free Speech & Association
Thomas Knapp
Now More Than Ever, It’s Clear the FBI Must Go
Binoy Kampmark
Dances of Disinformation: The Partisan Politics of the Integrity Initiative
Andrew Stewart
The Green New Deal Must be Centered on African American and Indigenous Workers to Differentiate Itself From the Democratic Party: Part Two
Edward Curtin
A Gentrified Little Town Goes to Pot
January 15, 2019
Patrick Cockburn
Refugees Are in the English Channel Because of Western Interventions in the Middle East
Howard Lisnoff
The Faux Political System by the Numbers
Lawrence Davidson
Amos Oz and the Real Israel
John W. Whitehead
Beware the Emergency State
John Laforge
Loudmouths against Nuclear Lawlessness
Myles Hoenig
Labor in the Age of Trump
Jeff Cohen
Mainstream Media Bias on 2020 Democratic Race Already in High Gear
Dean Baker
Will Paying for Kidneys Reduce the Transplant Wait List?
George Ochenski
Trump’s Wall and the Montana Senate’s Theater of the Absurd
Binoy Kampmark
Dances of Disinformation: the Partisan Politics of the Integrity Initiative
Glenn Sacks
On the Picket Lines: Los Angeles Teachers Go On Strike for First Time in 30 Years
Jonah Raskin
Love in a Cold War Climate
Andrew Stewart
The Green New Deal Must be Centered on African American and Indigenous Workers to Differentiate Itself From the Democratic Party
January 14, 2019
Kenn Orphan
The Tears of Justin Trudeau
Julia Stein
California Needs a 10-Year Green New Deal
Dean Baker
Declining Birth Rates: Is the US in Danger of Running Out of People?
Robert Fisk
The US Media has Lost One of Its Sanest Voices on Military Matters
Vijay Prashad
5.5 Million Women Build Their Wall
Nicky Reid
Lessons From Rojava
Ted Rall
Here is the Progressive Agenda
Robert Koehler
A Green Future is One Without War
Gary Leupp
The Chickens Come Home to Roost….in Northern Syria
Glenn Sacks
LA Teachers’ Strike: “The Country Is Watching”
Sam Gordon
Who Are Northern Ireland’s Democratic Unionists?
Weekend Edition
January 11, 2019
Friday - Sunday
Richard Moser
Neoliberalism: Free Market Fundamentalism or Corporate Power?
Paul Street
Bordering on Fascism: Scholars Reflect on Dangerous Times
Joseph Majerle III – Matthew Stevenson
Who or What Brought Down Dag Hammarskjöld?
Jeffrey St. Clair - Joshua Frank
How Tre Arrow Became America’s Most Wanted Environmental “Terrorist”
Andrew Levine
Dealbreakers: The Democrats, Trump and His Wall
FacebookTwitterGoogle+RedditEmail