A Post Office Bank and the Democrats (Part II)
This is the second part of a two-part post that explores the rationale for a Post Office Bank, #8 of the 12 Point Platform:
8. Post Office Bank
which I started working on because I thought it would be easy, instead of doing more work on #1: A Living Wage, which entails a definition of wage labor as a social relation. Anyhow, Part I of this post was a potted history of the Post Office, and it's good I just set the bar low there with "explores," because when I wrote Part I, I didn't yet know about Save the Post Office, and so along with a lot of other excellent material I missed these two excellent long-form backgrounders:
- Understanding Postal Privatization: Corporations, Unions and "The Public Interest" [PDF], a thesis on privatization by Sarah Ryan
- Preserving the People's Post Office, by Christopher Shaw
I don't think it will come as a surprise to anyone here that the Post Office privatizers are full of shit; what came as a surprise to me is just how full of shit they really are. Read those two pieces; you'll see too.
Part I took us all the way to 2012, where there was an interesting but all-too-temporary Post Office Bank boomlet (link, link, and link for example) touched off by this report (PDF) from the Post Office Inspector General (and not, mind you, the neo-liberal infested USPS management). For our purposes, we can reduce the report to four points. From the 2014 version:
1. There are 68 millions "financially underserved" adults. Page 6:
[M]ore than a quarter of American households are left outside or on the fringes of the traditional financial system. Some have no bank account whatsoever. Others have a checking account, but do not qualify for traditional forms of credit, forcing them to use costly services like payday loans and car title loans — which can often do more harm than good. Many of the 34 million financially underserved households — representing 68 million adults — are treading water very close to the economic edge.1 Unexpected expenses can push them over the brink into homelessness or bankruptcy, which come with broad social and economic costs. In addition to this at-risk population, there are many other Americans who are simply looking for new financial options.
2. The "financially underserved" must use crapified financial services like check-cashing agencies. Page 7:
The underserved are a geographically, economically, and demographically diverse group of people who, by choice or circumstance, operate partially or completely outside the traditional banking system. We define underserved as primarily consisting of two main groups: the unbanked, who have no checking or savings account, and the underbanked, who have a bank account but also used at least one non-bank financial service during the past year. These non-bank financial services include check cashing, money orders, remittances, payday lending, pawnshops, rent-to-own agreements, and other similar products and services.
And when I say crapified -- ever cashed a check at a check cashing place? -- I mean just that. We're talking usury:
Being underserved often comes at a hefty price. The average underserved household has an annual income of about $25,500 and spends about $2,412 of that just on alternative financial services fees and interest. That amounts to 9.5 percent of their income. To put that into perspective, that is about the same portion of income that the average American household spends on food in one year. In 2012 alone, the underserved paid some $89 billion in fees and interest.
3. A Post Office bank would help the "financially underserved" , both at a profit, and bringing great benefit to society. The profit part, page 21:
Financial services are hugely profitable for postal organizations around the world. Whether using a fully chartered “postal bank” or partnering with private institutions, postal financial services account for a major portion of postal profits and revenue in many countries. For more on the financial services offerings of foreign posts, please see Appendix C.
To get a ballpark figure, one can look at revenues in terms of the size of the alternative financial services market in the United States. If 10 percent of the $89 billion spent on alternative financial services was instead spent at the Postal Service, it could bring in $8.9 billion a year. That amount would be in line with the results seen by other industrialized countries. In 2012, postal financial services made up an average of 14.5 percent of their total revenue. For the U.S. Postal Service, that percentage would translate to $9.5 billion in additional revenue.58 In addition, the alternative financial services market is expected to continue growing in the coming years, and is “ripe for innovation.”
(Note that as we saw in USPS is a quasi-private entity with a universal mandate that nevertheless does not depend on government funding; if it were (again) a branch of government, the issue of profit would not arise.)
And now for the benefit to society part. Just by taking usury out of the equation (pages 19-20):
For the most vulnerable Americans — including many of the underserved — the difference between making it and not is a small amount of money. Among the 1.1 million people who filed for personal bankruptcy in 2012, their median average income of $2,743 a month was just $26 less than their median average monthly expenses.54 Put another way, these people were just $26 a month away from making ends meet.
[T]he Postal Loan product outlined in this paper could, by itself, save the average payday loan borrower more than $100 a month in fees and interest. With this kind of cost savings, users of postal financial services would have much more financial security. If this helped decrease personal bankruptcies by just 5 percent, it would not only help more than 50,000 people a year avoid the lasting stigma and financial effects of bankruptcy, it also would potentially keep some $10 billion a year in loans and other debts from being dragged through bankruptcy court, where much of it would be canceled at tremendous expense to creditors (most of whom are financial institutions).55 That would be good for American families, for banks, and for the entire country.
And by offering "small dollar" loans (page 18-19):
4. The Post Office is well-suited to help the "financially underserved." Page 6-7:
The Postal Service has numerous competencies and assets that would be critical for providing non-bank financial services. The first and possibly most important factor is the sheer ubiquity of the Postal Service. The vast retail network of more than 35,000 Post Offices, stations, branches, and contract units is spread out across the country and is particularly well established in small towns. Banks and other financial institutions still maintain tens of thousands of branches and other locations across the country, but that network is fragmented among thousands of players and is inextricably linked to population density and centers of economic growth. The postal network, on the other hand, is a single, unified network that is linked to geography. ... 59 percent of Post Offices are in ZIP Codes with one or no bank branches.
A second factor is Americans’ trust and familiarity with the postal “brand.” Trust is a crucial asset in financial services, especially when considering bank-wary unbanked and underbanked households that have been dealing with sometimes untrustworthy alternative financial services providers.
(Note that both the universal scope and the public trust are public assets the neo-liberals are working busily to eat away at and destroy, through branch closings and public cuts.)
Sounds like a great proposal! How the heck do we implement it?
Understand first that The Post Office itself has the power to implement a Post Office Bank. David Dayen, back in the 2014 boomlet:
The Postal Accountability and Enhancement Act (PAEA) of 2006 put restrictions on offering new “non-postal” services. However, the report points out, “given that the Postal Service is already providing money orders and other types of non-bank financial services, it could explore options within its existing authority.”
This transforms postal banking from a nice idea that works in other countries but would never get through Congress to something the USPS could test right away. While the Inspector General does not represent the final legal word on the subject, precedent would be on the side of the Postal Service if it wanted to construe the PAEA this way. The 1984 Supreme Court ruling in Chevron v. NRDC generated what is known as the “Chevron deference,” which gives fairly generous latitude to federal agencies in interpreting statutes. Congress could always act at the behest of payday lenders and other operators to ban the USPS from specifically offering financial services, but then gridlock would work in the Postal Service’s favor, foiling Congress’ effort to stop postal banking.
So, why haven't they? If would be irresponsible not to speculate, so I'd say the reasons -- hold on to your hats here, folks -- would be political.
First, the neo-liberals in the USPS management layer deep-sixed the Inspector General's proposal. David Dayan again:
All that remains, then, to make postal banking a reality is for the USPS to accept the Inspector General’s recommendation. Unfortunately, Postmaster General Thomas Donohoe has largely looked to closing facilities, streamlining personnel, and raising rates to salvage the Postal Service. Innovative proposals have not topped his list. Agency officials have declined to endorse the IG report thus far.
I think Dayen is giving Donohoe and USPS management credit for good faith that's undeserved. After all, if you have an institution with a universal mandate, closing facilities, reducing services, and increasing rates are just as compatible with destroying the institution as saving it, no? Then throw in a refusal to support a strong proposal to give the institution a new function that would help 68 million people... Well, that Donohoe is acting in good faith isn't the first thought that comes to my mind. Especially when American is -- once again, under neo-liberalism -- "exceptionally" bad in this regard. David Dayen once again, this time in Pacific-Standard (2013):
Almost every developed nation in Europe and East Asia operates a postal banking system. A few have been privatized, including what was the world’s largest savings bank, Japan Post. And some operate as a private-public partnership. But countries like Israel, France, Switzerland, Russia, South Korea, South Africa and more all allow their citizens to perform simple banking tasks at the local post office. New Zealand’s Kiwibank, a recent innovation, was established in 2002 specifically to protect citizens from financial predators. It has been wildly successful, according to Ellen Brown of the Public Banking Institute, with one in eight Kiwis moving their services to the postal bank in the first five years.
Of course, USPS management is trying to be "wildly successful" too. Just, apparently, at something other than serving the public.
Second, Obama has conspicuously failed to even mention Post Office Bank:
Sure seems odd. I mean, this is a political moment when the Democrats are supposedly turning kinda populist, and focusing on policies they can implement while bypassing Congress! A Post Office bank fits both conditions like a glove, yet zip, zilch, nada.
Third, for some reason, public officials who inititally supported a Post Office Bank have gone silent. For example [genuflects] here's Elizabeth Warren during the 2014 boomlet:
That is why the OIG report is so interesting. 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, at the same time, shore up its own financial footing. (The postal services in many other countries, it turns out, have taken steps in this direction and seen their earnings increase dramatically.)...
The Postal Service is huge -- employing more than a half million people -- and its history is long and complicated. Any change will take time. But this is an issue I am going to spend a lot of time working on -- and I hope my colleagues join me. We need innovative ways to create pathways for struggling families to build economic security, and this is an idea that falls in that category.
"Spend a lot of time working on"? Again, the website tells the tale:
(Warren's site doesn't repeat the search string in the (empty) result set, but you can see it up in the URL address bar.)
FInally, Richard Blum, Diane Feinstein's husband, is up to his eyeballs in cesspit of corruption involving the sale of U.S. Post Office properties. Here's one example (there are others which I'll save for later posts) of how the sale of Stamford, CT post office was conducted. Quoting at length:
As part of the case, the USPS had to prepare an environmental assessment, filed with the court in January. To do the assessment, the USPS hired an engineering design firm called URS Group.
This is where the Stamford chapter in the national story of the disappearing post offices becomes significant.
A wealthy financier named Richard Blum long ago invested in URS Group and for 30 years sat on its board, according to reporting by the website savethepostoffice.com. It was a good relationship for Blum. He sold his stake in URS Group nine years ago for $220 million, the website reported.
What's noteworthy about Blum is that he is chairman of CBRE Group, the world's largest commercial real estate firm. In 2011 the USPS signed an exclusive contract with CBRE Group to broker the real estate deals for the post offices, mail processing plants and land parcels it wants to sell.
So Blum, head of the real estate company selling the Stamford post office for the USPS, has a long relationship with the engineering firm the USPS hired to assess whether the Stamford post office site is environmentally safe.
Needless to say, the engineering firm found no problems with the property.
But wait! It's not just a matter of corrupt self-dealing. There's more!
In its contract with the USPS, CBRE Group agreed to sell the properties at or above fair market value, or not at all.
But, in a year-long investigation, [Peter Byrne, author of Going Postal] found that CBRE sold most of the real estate below even the assessed values. Remember that assessed value is a percentage -- in Stamford it's 70 percent -- of the fair market value. So if CBRE is settling for less than assessed value, it is selling USPS property at far below fair market value.
Byrne reports that in the first two years of its contract, CBRE chose 52 properties -- it appears that the Atlantic Street post office was one of them -- to market. The total assessed value of the properties was $232 million, so the fair market value likely was much more, especially since many of the properties were in coveted downtown areas where real estate prices escalated between 2011 and 2013.
But CBRE sold the properties for a total of $166 million only 71 percent of even the assessed value.
The reason? CBRE sold a significant portion of the properties to its own clients and business partners, Byrne found. So CBRE sold real estate, some of it paid for by taxpayers, to its clients and partners at a discount.
That looks like accounting control fraud to benefit cronies, to me.
So, all things, as it were, considered -- Hi, Nancy! -- it's reasonable that the post office unions would take matters into their own hands, and make the establishment of a Post Office Bank an item in their upcoming contract negotiations. David Dayen again, but this time in 2015:
However, in contract negotiations slated to begin February 19, the APWU plans to demand postal banking as part of a menu of revenue-raising options. “Our position is to expand and enhance postal services, not undermine them and degrade them,” APWU president Mark Dimondstein says. “Financial services will be on the table, it’s a significant area where we will have a conversation with the Postal Service management.” While seeking service changes is somewhat unusual in a labor contract, in this case, Dimondstein believes it connects directly to wages and hours for postal employees.
Winning that item would be not only a huge win for the postal unions, but a huge win for the union movement as a whole; after all, the Post Office bank would benefit 68 million financially underserved adults, not only union members
There's a campaign to support the APWU in this -- no website yet -- also described by Dayen:
Yesterday, fifteen consumer, progressive and labor groups inaugurated the Campaign for Postal Banking, demanding the creation of a “public option” for affordable financial services for unbanked and underbanked Americans. The campaign denounces the high cost of what they call “legal loan sharks” like payday lenders and check-cashing stores, and lauds the array of benefits for millions of people from fair access to simple banking services. And they plan to build public pressure on the Postal Service management to establish postal banking under their own authority, without having to go through Congress.
* * *
So, bottom line is pretty simple:
1) A Post Office Bank is a no-brainer. It would help 68 million people who are "financially underserved."
2) There's a union effort to support the Post Office bank, and a campaign backing the union.
3) Corrupt (Diane Feinstein's husband, Richard Blum), malfeasant (Obama), and silent (Warren) are a big part of the problem. Shocker, I know.
 The URL (and the PDF itself) imply that the report was produced in 2012, but this is the link provided in Dayen's 2012 TNR article, so I'm assuming it's the 2012 report.
 And why don't the the underserved use banks? The number one reason -- and this isn't a Louis CK sketch -- is that they don't have enough money:
I'd also like to come up with something a little more pointed than "financially underserved."
 To be fair, the Democrats focus is on "middle class" economics. We've argued here that, functionally, by "middle class" Democrats mean the top 20% of the population, not the bottom 80%, and their failure to support the 68 million financially undeserved with a Post Office bank supports that these.
 Please, can I ask that we not reinforce "public option"? It's going to bleed over to health care and retirement security, with destructive consequences for both.