Postal Service Banking
The Left wants to allow the Postal Service to crowd out private-sector small lenders.


John Berlau

While Senator Elizabeth Warren (D., Mass.) may proudly brand herself a populist, in her latest crusade she is casting her lot with the fat cats. Warren wants to bestow banking privileges upon the United States Postal Service (USPS), an organization with executives living high on the hog even as, by Warren’s own admission, its “financial footing” is in doubt.

The USPS pleaded poverty last month as it raised the price of a first-class stamp from 46 cents to 49 cents and promised that more rate increases are on the way. In the meantime, it apparently hasn’t used this extra revenue to improve service, as many mailboxes in Maryland and Washington, D.C., have remained empty for almost two weeks, angering Maryland’s largely Democratic congressional delegation. “Constituents report that they are waiting for prescription medications which are a week overdue,” wrote Senator Barbara Mikulski (D., Md.) in a February 21 letter to Postmaster General Patrick Donahoe.

Yet if Donahoe’s own mail is affected, he can probably just buy a pharmacy. In 2012, the USPS managed to pay him $512,000 in total compensation, according to page 67 of the USPS annual report. And in 2008, then–Postmaster General John E. Potter received more than $800,000 in total compensation and retirement benefits. As the Washington Times noted, “that is more than double the salary for President Obama.”

Dozens of other USPS executives also rank among the vaunted “1 percent.” According to the Federal Times, “As the U.S. Postal Service was careening toward a record $8.5 billion loss in 2010, it was paying more than three dozen top executives and officers salaries and bonuses exceeding [those] of Cabinet secretaries.” In fact, in 2012, Representative Kathy Hochul (D., N.Y.) and other House Democrats sponsored legislation to limit USPS executive salaries to the same level as Cabinet secretaries.

The USPS and its defenders respond that this compensation isn’t as high as that of executives at competitors Federal Express and United Parcel Service, and Warren might argue that it’s not as high as that of the CEOs of the nation’s biggest banks. But it’s certainly higher than the average compensation of the top folks at community banks and credit unions, as well as other lenders that will be hurt if the USPS expands into banking. And it is certainly higher than that of the average taxpayer, who will almost certainly be even further on the hook for the USPS’s woes. Though the USPS is losing money to the tune of billions of dollars a year and may require a direct taxpayer bailout, it still has been granted enough privileges by the government to crush private-sector competitors, such as small financial institutions, should it go into their line of business.

The Postal Reorganization Act of 1970 changed the Post Office into the Postal Service, a government-owned enterprise that must, under the terms of the Act, be largely self-supporting. It’s run by a board of governors appointed by the president of the United States and approved by the Senate.

But the USPS still retains many privileges, such as exemptions from income taxes and state and local property and sales taxes. The Private Express Statutes, which had given the U.S. Post Office a monopoly over first-class mail delivery since 1845, also apply to the successor Postal Service.

Under the law, companies like FedEx and UPS can compete with the USPS for “urgent” deliveries. But rivals must charge at least $3 or twice the Postal Service “first class” rate, whichever is higher, for anything they deliver.

Yet Warren and many others on the Left, including those who call themselves “anti-monopoly,” gloss over these privileges in backing this new postal venture. On the Huffington Post, Warren opines, “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.” Warren puts much faith in a report from the USPS inspector general estimating that the USPS could garner $8.9 billion in annual revenues (but not necessarily profits — an important distinction, as we shall see) from such banking ventures, and she maintains that “the Postal Service is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector.”

Yet financial services for low-income Americans are already being provided by many entrepreneurs in the private sector, and to the extent they are not, it is mostly because of the regulatory burdens from Dodd-Frank and extraconstitutional crackdowns such as the Obama administration’s Operation Choke Point. The new postal plan is the latest chapter in what my Competitive Enterprise Institute (CEI) colleague Iain Murray has dubbed “Obamaloans” — a scheme that envisions “the regulatory nationalization of the U.S. financial system . . . from top to bottom.”

On NRO, Murray writes that after “waging subtle war on the small financial businesses” that serve low-income consumers, the Obama administration is “subtly building an infrastructure to allow the federal government to lend money to the poor through a network of intermediaries, financed by taxpayers rather than investors.”

Only now, with the postal putsch, it’s not so subtle any more. The Treasury Department is still quietly funding so-called Community Development Financial Institutions to provide small loans, as Murray documents, but Obamaloan advocates are now pounding the table with the “public option” of the Postal Service.

And some don’t even bother trying to hide the fact that they view the postal plan not as an additional option, but as a takeover. Collectivist financial writer David Dayen expresses his desire in The New Republic that postal banking will “help drive out of business some of the most crooked companies in America.”

Dayen doesn’t specify which of the USPS’s potential competitors he believes are “crooked” or spell out the evidence against them, but Dodd-Frank and regulatory actions have certainly driven many community banks, credit unions, and other legitimate financial-service providers out of the business of serving low-income consumers.


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