Facebook is offline, we're about to sail off the debt limit cliff, and a pandemic continues to kill thousands of people every day. So let's talk about postal banking.
David Dayen¹ and I maintain a (hopefully) good natured disagreement about postal banking: He thinks it's great and I think it's stupid. That means today brings good news for both of us. For David, it's because the USPS has made public a pilot program for check cashing in a few East Coast cities:
According to USPS spokesperson Tatiana Roy, the pilot launched on September 13 in four locations: Washington, D.C.; Falls Church, Virginia; Baltimore; and the Bronx, New York. To test the system, Prospect art director Jandos Rothstein visited a post office in Falls Church on Saturday and successfully cashed a business check onto a Visa gift card.
“At first, [the postal worker] said she didn’t think she could take the check,” Rothstein said. “But she read the check into her scanner and it went through.” He didn’t need to show identification or endorse the check. The post office charged Rothstein a flat fee of $5.95, for any amount up to $500.
The pilot is obviously good news for David, but why is it good news for me? It's simple: I can walk into a Walmart anytime I want and cash a $500 payroll check for four bucks. There are other similar places that charge similar amounts, and also, admittedly, some storefront operations that charge more.
The storefront operations are a problem, though it's unclear exactly what the solution is. More to the point, though, is that for most folks who have a semi-regular need to cash business checks, the Post Office is competing with Walmart, not the local branch of We-Cash-It on skid row.
Now, obviously this pilot program is just a small test for a single service. We can't draw any firm conclusions from it. Still, it encapsulates my fundamental problem with postal banking: there's no reason to think that the USPS has any kind of competitive advantage in this space. I mean, do you seriously think the Post Office can cash checks more efficiently than Walmart? Please.
This is true for other services as well. Sure, the Post Office has loads of branches, but so do banks and supermarkets and other retail outlets. Available real estate is just not a big deal.² And these other folks know a lot more about banking—or can team up with folks who do—than the Post Office does. There's simply no reason to think that the USPS can run a profitable banking operation any better than all the other folks who are already doing it.³
If you want to force banks to offer low-cost Basic Banking™ accounts to everyone who wants one, fine. It might be a good idea. Or it might not. But it sure seems like a better idea than having the feds start up a whole new bank on their own.
¹Editor of the American Prospect.
²Banks: 80,000. Grocery stores: 40,000. Post Office: 35,000. Subway: 25,000. Starbucks: 15,000. Walmart: 5,000.
³For the post office, the goal of postal banking is to provide a new revenue stream. So yes, it has to be profitable.
Good thread with the tech explanation of what happened with Facebook:
https://twitter.com/ErrataRob/status/1445129721168158726?s=20
If not for the news, I would never know it was down.
Hard to remember a company making such a massive self-inflicted train wreck of its own service before. Even after 15 months of Louis DeJoy, USPS performs orders of magnitude better.
Does this mean some employees are trapped inside the buildings and can't get out?
I would think a public service wouldn't need to be directly profitable.
Why don't they try selling hamburgers in the Post Office?
Bingo! Government is not a business. Its goal is not to make a profit for The Shareholders.
I THINK the goals of postal banking are:
1). Avoid rationalization of the US Postal Service. Mail volume is materially down for its peak: do we need all of these branches/employees?
2) Provide low cost (read subsidized) banking services. As Kevin mentioned its not clear this goal can't be achieved via other means.
So to me, postal banking is more a full employment strategy (particularly union employment ) than anything else.
But it isn't low cost if it's pricier than other places.
(1) is a big reason, and I think it's a worthy one. People are unrealistic about the Post Office- it will continue to do big business carrying parcels, but carrying parcels is something the private sector does pretty well too (and Amazon is going to develop means to do it without the Post Office). So the future of the Post Office is not very secure, and a lot of folks on the left pretend it's just a matter of changing the pension obligations rather than a fundamental change in communications technology that is the issue.
But USPS is a big employer, and it is everywhere. So you want to find things that it can do rather than letting it atrophy. Postal banking, which post offices in other countries do, seems like a strong candidate.
The "everywhere" part is relevant. I live in a semi-rural semi-exurban county. We have three Walmarts and at least nine (I may have missed one or two) post offices. In much of the country the post office is far closer than the Walmart.
Isn't one reason the PO is broke is because congress (lobbied by UPS & FedEx) requires the PO to fund USPS retirements far and above any others?
Your nation still uses cheques?
A big chunk of our nation doesn't use banks. So electronic deposit isn't an option for them.
I'm fuzzy on the details but didn't a large chunk of those people start getting booted out of banks happen because of banking changes in the aughts? Iirc it was tied to some anti-terrorism banking law changes, with my impression at the time was the banks saying "We'll do all this extra paperwork in this law if you let us get rid of these smallfry accounts."
Yes, banking laws gradually changed to require more and more documentation to open an account and folks who lack the necessary documents to prove identity were up the creek.
KYC did nothing wrong!
If the Postal Service is really to provide an alternative banking service which the private sector essentially won't do - that is provide accounts for low-income people - then it should be able to handle electronic deposits. Do private banks charge for this and do they charge for withdrawals? Of course they do charge (merchants) a lot for credit-card services, which everybody pays for through higher prices.
As for identification, this is something which should be - must be - solved by the federal government with a universal ID. That would solve many problems - why is no one talking about it?
Just to provide check cashing services would only be a very small step toward being useful rather than generating revenue.
I am a solidly middle class white guy. I get paid with a check. I work for a solo practitioner. To get direct deposit I would need to open an account with the same bank he uses. I assume that bigger employers get better terms from their banks. I have never had this restriction anywhere else. Having no desire to buckle under to The Man, I get a paper check. Since the shutdown we don't actually see he other very often, so he hands me two months' worth at a time. We have been together a long time, and have a relationship where this works.
The post office is more efficient than Walmart for one big reason: there's a post office in most neighborhoods, including inner-city ones. Walmarts are a bit harder to get to. A 30 mile round-trip to the closest-to-me Walmart is a $3 gallon of gas and an hour of time (so Google maps tells me). Sure, I'll stack other errands on top of the check-cashing at Walmart, but it's still a bigger burden than the ten minute walk/three minute drive to the post office.
Most people don’t live 30 miles from a Walmart… and for those that do, the post office isn’t usually much closer/less car dependent to get to. What the difference if you have to get in a car to go 20 miles to the PO vs 30 to the Walmart?
Older Suburbs and Cities don't have Walmarts - there's no Walmart in my town - the closest Walmart is about 20 minutes or more away from me depending upon traffic but the nearest post office is 5-10 minutes away giver or take. The pilot places, I bet aren't near Walmarts - there's none in Falls Church, nor Bronx, NY, there's only 3 in DC.
In addition there's a ton of rural places where Walmart is no more and yes the post office is far closer than the nearest Walmart.
Huh? As Kevin noted there are 5,000 Walmarts and 35,000 Post Offices. Thats a pretty huge difference.
Where I'm sitting right now I have a Post Office 5 minutes away and the nearest Walmart is 45 minutes away.
I don't get that either. I have lived a lot of places up and down the Eastern Seaboard in the last 20 years. I have ALWAYS lived within walking distance of a Post Office (At least one) and only once in the six places I lived (College town, big city, rural small town) have I lived within walking distance of a WalMart.
Get out of the cities and post offices are ubiquitous, often as legacies from when small towns were viable economic units. The Walmart will be just outside the county seat, doing its part to make sure those small towns remain economically unviable.
Kevin is showing his Upper Class White Guy creds again hahaha. The push for postal banking is to provide an alternative to the evil payday loan places and other nefarious practices banks do that make it very, very expensive to be poor. There little profit in being the banker for poor people unless you can take advantage of them by usurious fees like say for overdrafts, check cashing and money orders
Walmart offers cheap check cashing for smaller checks but their website says checks over $1,000 are 8 bucks a pop. And there's a limit to how many per day you can cash.
One of the pilot places - Fall Church - there's no Walmart near there but lots of working class folks living in garden apartment complexes. I'm assuming the post office with the pilot is not the upscale little city part of Falls Church but part of Falls Church that's actually in Fairfax County and very much working class immigrants.
All that said I'll predict that the pilot project is doomed - congress will never allow it - they are in the pocket of folks dead set against affordable honest banking for poor people.
As compared to $5.95 UO to $500 at the pilot post office and however much more beyond that cut/off. And if someone is looking to cash that many checks are the really all that likely to not have an actual bank account?
You'd be surprised at who the unbanked are, I could see a free lance handyman or maybe a piano teacher trying to keep their source of income under the radar.
The O in USPO will change to OnlyFans.
Under the radar to what end? Evade taxes? Alimony? Child support?
Yeah, Kevin's ability to hop into his car anytime of day and head out to the Walmart isn't exactly universal.
The USA is decades behind the rest of the modern world as far as banking is concerned
The best way to fix that is to have the Post Office as the fallback bank for every American citizen
The Post office could have an account for every American - this would mean that everybody would have access to digital banking
"The Post office could have an account for every American - this would mean that everybody would have access to digital banking."
Agreed. This is not only a good idea but long overdue. Granted they're going to want their cut. I understand that but it's not going to be at 600 percent interest rate which forces the poor to write checks to cover checks to cover checks. Soldiers too. You see plenty of those check cashing places outside military bases.
There's nothing good-natured about Dayen. He's a goddamn snake.
Let's get more radical. All government payments including, SNAP, the child tax credit and tax refunds should go into the postal bank. If people want to transfer it automatically out to another bank more power to them. In order not to compete with the private sector the postal bank should have very limited services. A single account with electronic transfers, a debit card, web access, phone apps and the ability to send money orders if physical "checks" are needed. No interest bearing accounts or anything remotely like that (although the Postal Bank would get interest itself on the assets in order to self-fund). If the existing banks are unable to compete with that then they do not deserve to exist. In my dream world that debit card is also a REAL ID compliant identification and can function as the "something you have" part of a two factor authentication scheme. There you go, I just solved the problems of the unbanked, voter ID, and fraud due to SSNs being used as a means of authentication -- you're welcome.
We don't have all that many "banks" (or did you actually mean "branches" ?) in Australia, and we don't have grocery stores, Subway or Starbucks that cash cheques and we don't have Walmart at all. But we do have 4433 Post outlets Australia wide, of which 2977 are 'licensed' (ie privately owned), 831 are 'Corporate' (ie Post owned) and 637 are community postal agencies.
The great majority of Australia Post outlets (3500 of them) provide banking services:
"With access to over 80 banks and financial institutions, including our key partners CommBank, Westpac and NAB, you’ll find it easy to manage your money locally.
You or your small business can deposit cash and cheques, withdraw money and make balance enquiries for free at participating Post Offices, including more than 1,800 in rural and remote locations.
It’s our way of ensuring every Australian has access to banking services. Enjoy more convenience as you get your mail, parcels, office supplies and banking transactions sorted in one place."
I guess it's just another case of us having to try to catch up with the USA once again and get rid of all those Post Office banking facilities, and import Walmart instead.
We're far ahead of you in rent-seeking, mate. You'll have to narrow that gap first, and then the rest will fall in place.
Will the Post Office waive the check-cashing fee if you have an account? $6 for a 500 or 1000 buck check isn't so bad, I guess, but if you're heading in there trying to cash a $20 check, that still sucks. I suspect even if we get a poastal bank, poor people will still seek out usurious payday loan outfits because having a checking account doesn't mean you can cover that new set of tires you need right now.
A new set of tires? Tire wear is obvious and somewhat predictable. One would/should know well in advance when a new set will be needed.
Now, a new tire, singular, that is something which could be a “right now” expense.
It becomes a very much bigger deal if you live in a poor neighborhood. Walmart isn't there. The Post Office is. Walmart is largely in the suburbs where there are, indeed, a lot of alternatives. Not everyone lives in the suburbs.
"I mean, do you seriously think the Post Office can cash checks more efficiently than Walmart? Please."
I'm curious as to how many times you've had to conduct any business at the Walmart Customer "Service" Desk.
My somewhat limited experience over the past five years is that the line at the Post Office moves a lot faster.
Please look up United States Postal Savings System in Wikipedia. It was the original Postal Banking program that ran from 1911 to 1967. It was greatly used across the country; according to Wikipedia, "At its peak in 1947, the system held almost $3.4 billion in deposits." I believe the commercial banks were part of why the program ended, as they would rather not have the competition from a non-profit organization that could be accessed anywhere in the country by the members holding an account. Postal banking is worth exploring since it was already done once. Congress may have other ideas about it, as the banking industry has deep pockets and a vested interest in seeing it fail.
That's interesting. I had no idea such a thing had even existed.
For the post office, the goal of postal banking is to provide a new revenue stream. So yes, it has to be profitable.
That "goal" could be changed by Congress. The other outfits (Walmart, etc) Kevin mentions are by nature profit-seeking entities. The USPS doesn't have to be. Even if a public banking service were operated at a loss, would that be such a problem? I can't run the numbers but, I suspect a modest program that provided low cost checking account, bill payment and debit card services to the currently unbanked could do a lot of good, even if it cost the taxpayers a few billion a year. OR, sure, maybe we could require private banks to offer such a service. But does anybody think we can trust them over the long term?
I don't see what would be wrong with postal banking, many European countries have it. If run on a non profit model and restricted to checking and savings account or their electronic equivalent it could achieve a lot of good.
The fee for check cashing in itself says nothing about the costs of owning an account from which bills can be paid by electronic transfer. Unlike for check cashing the combined balances in a large number of accounts provide a capital that can be made to bear interest. This is what the Post Office in Switzerland did when I was young. It was by far the most convenient and cheapest option until around 1990 or so when the Postal Bank began to be run "like a business", i.e. with a predatory mindset. This turned "Postfinance" into just another bank, as nasty as the nastiest of them....
I think the Feds should underwrite the cost of a Basic Banking account for everyone, either through the Post Office or something else (USPS just brings greater real estate). Just a simple banking account that creditors can't garnish or seize, with a debit card that you can use like a reloadable credit card for various purposes (and have it double as the EBT Card).
Kevin, you're cheating a bit on footnote 2. You start by listing all business outlets of a particular type, and then switch to all outlets of a given enterprise. Sure, there are more than twice as many bank branches as there are postal outlets, but how many different banks are those branches split up among? The Post Office's 35,000 outlets are way more than any other single enterprise in your list (what about Starbucks; it seems there are A LOT of them, but maybe not in small towns).
> There's simply no reason to think that the USPS can run a profitable banking operation any better than all the other folks who are already doing it.
But the USPS doesn't have to be better. The service has extremely low overhead, so the USPS just has to make it convenient.
Drum is a moron. There are 7 times as many Post Offices as Walmarts in the US.
There are almost no Walmarts within the city of Boston, but numerous post offices. Probably one in every neighborhood. Orange County CA is way too sterile a place for opining about the lives of the working poor. Drum should go ahead and sign on with the Republicans. He already agrees with half of what they sa.