Why not turn an organization that can’t figure out how to make money into a bank?
The Post Office can’t pay its bills by delivering the mail. Surely it can make money lending money to people who can’t pay it back.
This brilliant can’t fail scheme comes from the mind of the Post Office Inspector General and Elizabeth Warren. It was said of Napoleon III that insane schemes multiplied in his brain faster than rabbits. I don’t even want to picture what the inside of Elizabeth Warren’s brain looks like.
As the U.S. Postal Service continues to lose money each year, a new report suggests a way to add to its bottom line: offer banklike services, such as a check cashing card that would allow holders to make purchases and pay bills online or even take out small loans. The idea is to provide services that are now unavailable in many communities.
Sure the USPS can’t figure out how to make money on its core function, so why not have it branch out into a risky and complicated line of work that it has no experience with.
It can’t miss.
But at least the Post Office will be targeting profitable sectors where it will make money? Oh right, of course not.
More than a quarter of all Americans, some 68 million, are now underserved by banks — “underbanked,” as the white paper from the Inspector General of the U.S. Postal Service calls them. They live in places where there are no bank branches, or just one. Many have to rely on check cashing outlets and payday loans, which often charge exorbitant fees.
Betsy Cavendish, president of Appleseed Network, says being able to go to the post office for simple financial transactions would be “win-win. Many people are spending $2,500 a year or so in extra fees.”
“They have a lack of options for small-dollar loans and too few savings vehicles. Meanwhile, the Postal Service is in every zip code in the country and could potentially offer needed financial services,” she says.
It’s a win for the people who will get cheap loans from the Post Office, it won’t be a win for the taxpayers or the Post Office.
If banks could make money in those sectors, they would. It would be a lot smarter in those cases for the Post Office to partner with banks, instead of diving into an area it doesn’t have any experience with. In some cases, the infrastructure of the Post Office might be enough to turn some kind of profit, but we’re talking about low margins or an actual bank would be there.
Also physical bank branches are probably going to disappear in two decades so the Post Office is jumping aboard another dead end that’s going to be wiped out by the internet.
But Elizabeth Warren thinks this is a great idea.
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.
It might not be a bad idea to have the Post Office provide bill paying and check cashing services, but once it gets into lending, it’s going down a bad road.
Payday lenders are a major problem, but there’s also a reason they exist. To undercut them, the Post Office would have to take on risky loans with little protection and that would wipe out whatever profits it picks up putting it and us deeper in the hole.
The IG’s report suggests, “The Postal Service has a tremendous opportunity to offer small loans that could save borrowers a lot of money — billions of dollars when aggregated across all potential users.”
A Postal Service that is billions in the hole will lend out billions more to people with bad credit ratings to get out of debt.
How can this amazing plan possibly fail to bail out the Post Office?