Dean Baker
November 17, 2014, TruthOut

Dean Baker
November, 17, 2014, The Cato Institute

Eileen AppelbaumNovember 14, 2014, The Hill

I see Kevin Drum is unhappy about my endorsement of postal banking as a way to address the Postal Services financial problems. Kevin correctly points out that the Inspector General’s (IG) argument for postal banking didn’t involve conventional savings and checking accounts, but rather more narrow financial services:

“1) payment mechanisms (i.e., electronic money orders), (2) products to encourage savings, and (3) reloadable prepaid cards. The first is fine, but not really ‘postal banking.’ The second is problematic since even the IG concedes that the reason poor people tend not to save is ‘largely due to a lack of disposable income among the underserved.’ That's quite an understatement, and it's not clear what unique incentives the postal service can offer to encourage savings among people who have no money to save. That leaves prepaid cards—and maybe a good, basic prepaid card sponsored by the federal government is a worthwhile idea. But that's really all we have here.”

Let’s start with these items. The revenues from payment mechanisms and reloadable prepaid cards run into the tens of billions of dollars a year. Much of this comes directly from the government, which now uses a substantial portion of the budget for food stamps and other government transfer programs to pay banks to provide beneficiaries with cards. The Postal Service could almost certainly do this at a lower cost.

More importantly, many low and moderate income people get ripped off by paying exorbitant fees to check cashing services and other intermediaries to get access to their money or to send it to a third party. While the fact that these people may save large amounts of money by using a postal bank, which they might use because they trust the post office, draws a “meh” from Kevin, that sounds like a pretty good thing to me. Imagine paying 50 cents or a dollar to have your $200 pay check cashed instead of the ten dollars that a check cashing service might charge.

Kevin’s right that the biggest obstacle to savings for low and moderate income people is a lack of money. But the fact is that when they do save, they often pay excessive fees to intermediaries. This is a widely recognized problem and there is bipartisan support for creating some sort of low cost saving vehicle that low and moderate income people could use. That doesn’t mean that everyone would say the Postal Service should be the venue for this savings, but there seems no reason to rule it out apriori as a candidate.

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