Banks: Postal Service not cut out for finance

Banks: Postal Service not cut out for finance

The banking industry is panning a plan from the fiscally unsteady U.S. Postal Service to test the waters in the financial services industry.

On Friday, USPS officials published a white paper proposing that post offices enter into the financial services industry, in some cases partnering with credit unions to provide products such as prepaid cards and small loans.

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Additional inside-the-Beltway chatter about USPS officials turning post offices into banks is drawing incredulity from the financial sector, where business groups contend that a federal agency in financial trouble shouldn’t be handling Americans’ bank accounts.

“It seems crazy. These people are not that good at managing how to deliver the mail and they want to get into this business?” said Francis Creighton, executive vice president of
 government relations at the Financial Services Roundtable.

“If the same people who are managing the Postal Service now want to get involved in banking, then that should scare every American,” he added, contending that the financial industry “doesn’t even take this as a serious issue.”

Supporters, meanwhile, argue that the USPS is uniquely positioned to assist underserved Americans because of the agency’s thousands of offices across the country.

Liberals such as Sen. Elizabeth WarrenElizabeth Ann WarrenOn The Money: Senate approves 4B spending bill | China imposes new tariffs on billion in US goods | Ross downplays new tariffs: 'Nobody's going to actually notice' Overnight Health Care: Senators target surprise medical bills | Group looks to allow Medicaid funds for substance abuse programs | FDA launches anti-vaping campaign for teens Warren joins Sanders in support of striking McDonald's workers MORE (D-Mass.) have recently said that post offices should get into the financial services industry. Warren argues they could serve as an alternative to payday lenders, whom she frequently accuses of taking advantage of consumers.

According to a USPS inspector general report, the expanded offerings could benefit “68 million underserved Americans who either do not have a bank account or rely on expensive services like payday lending and check cashing.”

“The products also could help the Postal Service generate new revenue to continue providing universal service,” according to the report. The report also suggests that financial institutions partner with USPS officials in offering such financial services.

Camden Fine, president of the Independent Community Bankers Association isn’t biting. 

“The idea of trying to salvage a floundering operation by venturing into a new business with inherent risks and for which the Postal Service has no qualifications or expertise defies logic, reason and prudence,” Fine said.

Creighton said that if the USPS were to enter into the banking industry, it would raise significant regulatory questions, including whether the entire institution would be “too big to fail.” If the Postal Service were deemed a “systemically important financial institution” by federal regulators, it would be subject to more stringent rules.

Richard Hunt,  executive of the Consumer Bankers Association (CBA), also criticized the idea, which has surfaced repeatedly, as the USPS looks for ways to evolve and stay afloat.

“It must be Groundhog Day,” Hunt said. “CBA has expressed and will continue to express concern in response to the idea of a federal agency, which has lost billions of taxpayer dollars over the years, entering the financial services space.”

But Dennis Kelleher, CEO of the Wall Street watchdog group Better Markets, said that the banking industry to “trying again to kill off competition.”

“It is no surprise the big banks are trying to prevent the post office from providing low cost, easy access to banking services to tens of millions of Americans,” Kelleher said.

He said that part of the reason the USPS has questionable financial footing is because it “isn’t allowed to run solely as a profitable operation.”

“It is required to provide mail services to virtually everyone in America, however remote or rural, regardless of how profitable that might be,” Kelleher said. “There is no reason to believe that the post office couldn’t run a profitable bank business.”

A USPS spokesperson noted that the white paper was meant to “explore strategic ideas” and to enhance USPS’s “viability and efficiency.”

“These white papers are presented to USPS management for their consideration and contain no recommendations,” the spokesperson said.