Pandemic Underscores Need for Postal Banking

(This article first appeared in the July/August 2020 issue of the American Postal Worker magazine)

The modern movement for postal banking in the United States was born out of the ashes of the 2008-2009 Great Recession. One of the early effects of the financial crisis that set off the recession was the closure of hundreds of bank branches throughout the country. This trend continued for years after the recession. Between 2008 and 2016, more than 6,000 bank branches closed, leaving many former customers without access to basic financial services and laying bare the sheer magnitude of the crisis affecting America’s 80 million unbanked and underbanked people.

As observers and policymakers studied possible solutions to addressing their needs, postal banking reemerged as a viable and practical solution. Today, as the pandemic grinds the economy to a halt and millions of workers are out of their jobs, postal banking is once again gaining attention as this crisis reveals other systemic problems in the country’s financial system.

You probably recall the $1,200 in stimulus funds that individuals were to receive as a part of the federal government’s early efforts to boost household finances in the first weeks of the pandemic shutdowns. What you may not have realized however, is that according to the Center on Budget and Policy Priorities, at least 12 million eligible recipients still have not received their stimulus funds and millions more had the payments delayed by crucial weeks or months as bills piled up.

Why? The IRS, which was responsible for distributing the funds, simply did not have a way to reach every person in the country. While most of the funds were sent via direct deposit to bank accounts, this was obviously not a solution for the 8.4 million households in the country who are unbanked and for many of the additional 24 million underbanked households.

In fact, the population of people who have not yet received their stimulus checks, or were subject to undue delays in receiving theirs, roughly corresponds with the same demographics of people who are underserved by our current financial system. These are lower-income and working-class households, disproportionately people of color. Both in “normal” times before the pandemic and now, this country’s financial system is failing them and leaving them further and further behind.

Fortunately though, some campaigners and policymakers have taken notice. On June 11, the House Committee on Financial Services held a hearing on “FedAccounts.” FedAccounts is a concept that would allow individuals to access the same banking service that the Federal Reserve offers to financial institutions. One of the Federal Reserve’s roles is to function as the “bank for banks,” allowing them to deposit money, clear payments and the like. Advocates of FedAccounts say that the Federal Reserve ought to offer this service to anyone, not just the big banks.

FedAccounts advocates recognize that the Postal Service’s network of post offices could service as the “front of house” servicing center for FedAccounts, providing an access to every neighborhood of the country and a trusted window clerk to help customers through the process.

This concept would be one way to ensure that everyone in the country had access to essential financial services, and in times like these when the government is eager to get money into consumers’ hands quickly, it would be able to reach them quickly and efficiently, without exacerbating existing problems of income inequality and other inequities of our existing financial system. Even the chairman of the Federal Reserve can see the appeal of FedAccounts. Asked about the concept at a recent congressional hearing, Fed Chair Jerome Powell warned against them, because they might prove too popular: “I worry what would happen to the rest of the private banking system, because a lot of people would opt to keep their personal money at the Fed.”

The Campaign for Postal Banking is a coalition of consumer, worker, financial reform, economic justice, community, civic, and faith-based organizations calling for low-cost, consumer-driven financial services via the Postal Service. Products and services could include check cashing, bill payment, savings accounts and small-dollar loans. Postal Banking will benefit consumers without access to traditional banks as well as those who want a public option. The expansion of services would also strengthen our public Postal Service. To learn more, visit www.CampaignforPostalBanking.org.