Category: Personal Savings
Hits: 483
Lo, over the last year, partisans of an even greater government role have been beating the tom-toms for the Postal Service to provide financial services, putatively to help the unbanked and "underbanked" and offset its losses delivering mail. The inspector general's white paper "Providing Non-Bank Financial Services for the Underserved" floated the idea of the Postal Service's delivering payment and credit products. Moving the ball down the field, he issued a request for expert proposals detailing how this would work.

Progressive heartthrob Senator Elizabeth Warren gushed, "If the Postal Service offered basic banking services -- nothing fancy, just basic bill paying, check cashing, and small-dollar loans -- then it could provide affordable financial services for underserved families, and . . . shore up its own financial footing." Singing from the same hymnal, The New Republic's David Dayen enthused that President Obama should step in, bypass Congress, order USPS to deliver financial services, and thereby create jobs.

If Warren and Dayen believe that this would be an attractive business, presumably they think that they or USPS management are savvier than bankers. If the profit opportunity here is so good, why does a government agency need to be involved? Perhaps Warren should tap her well-heeled network, launch Warren Bank, and make a killing by doing good.

The white paper laments that 27 percent of Americans have no emergency savings and, without a hint of irony, suggests the Postal Service could encourage savings. The personal savings rate fell from 13.1 percent in 1973 to a paltry 4.9 percent in 2013, not because Americans couldn't save at the local post office, but substantially because of financial repression -- government maintaining artificially low interest rates, holding down the cost of the national debt, and putatively bolstering an anemic economy. The Fed has kept the real federal-funds rate negative since 2008, punishing savers and causing systemic capital misallocation.

Postal-banking advocates argue that the un- and underbanked are a problem the Postal Service is uniquely qualified to address. Maybe it's a problem, though 21 percent of those who don't have a bank account, when polled, say they "don't need or want an account." The "underbanked" have bank accounts but are so deemed because they use financial services of which enlightened regulators don't approve.

The market for consumer financial services is vigorously competitive and innovative, where it's permitted to be. Government shouldn't deliver services better performed by the private sector. The USPS inspector general's identified opportunities -- unsecured consumer loans, general-purpose reloadable prepaid cards, bill payment, savings accounts, and check cashing -- are well served by private-sector firms. The white paper preposterously suggests that the Postal Service could profitably provide short-term loans to risky consumers at 9 percent of the cost of private-sector payday loans.

With 31,000 retail offices, the Postal Service has national distribution. That, however, is not a compelling reason to provide non-postal services. Nationwide, there are almost 100,000 retail bank branches and over 400,000 ATMs. Retailers with national footprints such as Walmart, Safeway, Walgreens, and 7-11 distribute financial services. Western Union, MoneyGram, and a host of non-bank financial-services providers blanket the country. And smartphones and PCs increasingly provide truly ubiquitous, 24/7 banking access.