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Warren writes: "The poor pay more, and that's one of the reasons people get trapped at the bottom of the economic ladder."

Massachusetts Sen. Elizabeth Warren (photo: Eric Thayer/Reuters)
Massachusetts Sen. Elizabeth Warren (photo: Eric Thayer/Reuters)

Coming to a Post Office Near You: Loans You Can Trust?

By Elizabeth Warren, Reader Supported News

02 February 14


he poor pay more.

According to a report put out this week by the Office of the Inspector General (OIG) of the U.S. Postal Service, about 68 million Americans -- more than a quarter of all households -- have no checking or savings account and are underserved by the banking system. Collectively, these households spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $2,412 per household. That means the average underserved household spends roughly 10 percent of its annual income on interest and fees -- about the same amount they spend on food.

Think about that: about 10 percent of a family's income just to manage getting checks cashed, bills paid, and, sometimes, a short-term loan to tide them over. That's more than a full month's income just to try to navigate the basics.

The poor pay more, and that's one of the reasons people get trapped at the bottom of the economic ladder.

But it doesn't have to be this way. In the same remarkable report this week, the OIG explored the possibility of the USPS offering basic banking services -- bill paying, check cashing, small loans -- to its customers. With post offices and postal workers already on the ground, USPS could partner with banks to make a critical difference for millions of Americans who don't have basic banking services because there are almost no banks or bank branches in their neighborhoods.

Families rely on financial services more than ever, but those who need them most -- who struggle to make ends meet -- too often must contend with sky-high interest rates and tricks and traps buried in the fine print of their loan products.

This is not a new problem, and policymakers in Washington have long sounded the alarm. Michael Barr -- an assistant secretary of the Treasury under President Obama and law professor at University of Michigan -- has pushed on this issue for years. As Chair of the FDIC, Sheila Bair put in place a Committee on Economic Inclusion to generate ideas for expanding access to lower-cost banking services. (I had the honor of serving as a committee member.) And we've taken some important steps forward. The new Consumer Financial Protection Bureau (CFPB), for example, is a cop on the beat that is putting in place commonsense rules to protect consumers and ensure that payday lenders are held accountable when they break the law.

There has been momentum in the right direction, but there is so much more work to do to make sure that families have access to affordable and fair financial services.

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 report has provoked a great deal of discussion, and it is worth reading David Dayen's article about it at the New Republic -- "The Post Office Should Just Become a Bank: How Obama can save USPS and ding check-cashing joints."

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.

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+125 # Fairlady 2014-02-02 12:14
Great idea and sorely needed. We have to
help those who need it a hand up toward
financial stability. Hooray for Elizabeth Warren. The country was lucky to have her come along at just this time---sorely needed.
+17 # Eldon J. Bloedorn 2014-02-02 19:15
I like senator Warren. Has great ideas. Earl Nightengale:"ev ery great idea, to work, be great, has to be supported by 100 ideas." In this case, this idea, she needs tremendous support from congress. Lots of politicians. A great idea, she gets the support, done deal. No support, no done deal. Great ideas, if not supported are subject to the law of gravity. They fall of their own weight.

There are lots of great ideas that did not make it out of kindergarten because they were not sold. We have to see her plan. How will she sell this potentially great idea?
+103 # Puck 2014-02-02 12:20
Another great idea from Elizabeth Warren, a senator who understands why her constituency sent her to Washington! Bravo, Liz!
-1 # Eldon J. Bloedorn 2014-02-03 22:30
Fine. But if she cannot sell her idea, she may as well not have it. Here comes the red ink because I'm a pragmatic person.
+2 # guyachs 2014-02-05 10:06
So you think no one should try anything because it might be difficult!
If the other side is the only one willing to try something, they win.
+55 # economagic 2014-02-02 12:25
I'm sure Senator Warren is aware that there is a precedent for such an arrangement in this country. I'm passing the article on to a friend with much greater knowledge of this episode in American history, but it produced significant and widespread benefits for many people for several decades. My only caveat (as a "card-carrying economist"--a line I stole from Dean Baker) is that it should be done in such a way as to avoid increasing the dependence of Us the People--either the government or the public at large--on the too-big banks. The latter and their "partners" in academia have been scheming for more than a decade to ensnare the "unbanked" in their web, a proposition in which said "unbanked" not surprisingly have shown little interest.
+39 # Joe Bob 2014-02-02 15:01
The best way to keep it clean is to create a credit union. USPO Credit Union. The big fuckin banks can just take a hike.
+59 # reiverpacific 2014-02-02 12:36
When I was growing up in Scotland, the British (Royal Mail) had a range of financial services including savings accounts with their own designated window, where you could buy "Postal orders" -like single checks- for any value to be made out to an individual or business and sent or delivered personally to pay bills -good gifts too as well as multiple other financial services (sadly, the last time I was home, the local P.O. was located in a Safeway Supermarket).
I think that this would be a great additional service to add to the USPO.
I'd hope that these services would be kept out of the hungry, corrupt, wildly inaccurate milieu of the appalling credit bureaus. I'm writing to Mrs Warren and Senator Jeff Merkely (D Or) about the possible breakup of these privately-run monsters that can relegate anybody or business who has had a downturn, to the financial dumpster and drive them into the willing hands of predatory "paydays loan" sharks but not in Oregon and a few other states where they are illegal.
Post offices, especially in small towns, are places where you not only get and receive mail but meet and chat a while, so have social benefits (of course the Corporate world hates ANY social interaction).
This to me, illustrates why Elizabeth Warren should NOT run for President but be in a high-profile supervisory financial/econo mic position, as she not only understands bankster-speak better that they do but is creative and progressive, an expert in her field on OUR side.
+1 # AndreM5 2014-02-03 11:35
I believe you can get a check like this already at the USPS.
+5 # WolfTotem 2014-02-03 12:32

+53 # Futilitarian 2014-02-02 12:37
I couldn't be happier to read this. I first read about this idea a few years back. A much needed service. What are we waiting for? Of course, I also can't wait to hear the back-pedaling about how competition makes the marketplace stronger and how this competition is somehow unfair and private and free enterprise is the only way to go and this idea excludes private and free enterprise, the very foundation of capitalism. Who cares what is of benefit to the people? Especially those that possess the least wealth. After all, capitalism is the process of extracting the maximum amount of wealth possible from the victims, er, I mean customers. Capitalism has already solved this problem and it doesn't actually exist. It's just socialists pushing a socialist agenda. What's really needed is privatization of the postal service. Then all will be right with the world. So, yeah, okay, this would be alright if we privatized the postal service and then rolled all the debt into risky debt obligations, rated them AAA, sold them to suckers and retirement funds the world over and bet against them ourselves. Imagine how much money could be made. Fan-freakin-tas tic! (sarcasm alert)
+45 # tonenotvolume 2014-02-02 12:55
One example is Japan's Postal Bank. Very solid, very conservative, very reasonable. At one time it held more deposits than any other institution. Unfortunately, Japan's present government is pushing towards privatization.
+20 # keenon the truth 2014-02-02 17:25
It's still good and useful. I have an account there, and transactions are almost free. There are ATMs in every PO, and you can also access them through regular bank ATMs.They operate savings plans, insurance for retirement and for education costs. Oh, and the postal services are amazing! Two deliveries a day, and prompt, same or next day, redelivery in a specified by you timeband. I seriously love the Japanese post office.
+5 # bingers 2014-02-03 10:48
Quoting tonenotvolume:
One example is Japan's Postal Bank. Very solid, very conservative, very reasonable. At one time it held more deposits than any other institution. Unfortunately, Japan's present government is pushing towards privatization.

Other than manufacturing, privatization is always a bad idea, and even then not necessarily a positive thing, but in keeping with our basic structure. All things that are in the public interest should be done by the government, like energy and utilities.
+49 # liandro 2014-02-02 12:56
I wonder what kind of infuriating objection the Republicans will raise to this great idea--and they will of course.
+36 # giraffee2012 2014-02-02 14:17
Quoting liandro:
I wonder what kind of infuriating objection the Republicans will raise to this great idea--and they will of course.

The Republicans backed by banks (Wall street) will be taking money from the bankstes, resulting in a NO vote. You know: Stealing from the rich to give to the poor is "anti GOP'.....
Sarcasm intended.

pressure your congress people to vote FOR this wonderful Warren proposition. the rep in my area is a GOPer and I will bombard him with phone calls
+49 # hattie12KY 2014-02-02 13:03
I admire France's ability to give everyone quality health care yet cut costs. For years, the French have offered bank accounts at their post offices. Easily done--and we could use current USPS buildings and employees.
+5 # Even 2014-02-03 06:29
It's not just France but all of Western Europe.
+53 # Working Class 2014-02-02 13:07
The fact is the US Post Office did provide banking services from 1910 to 1967. Re-establishing this service to would help those who are not served by the current private banking community. I would not want to see the US Postal Service partner with any private bank in this venture however. Rather, a US Postal Bank should be run as a public bank, backed by the full faith and credit of the United States. Deposits in a US Postal Bank could be leveraged to finance needed infrastructure projects such as bridges, and other public works. Funding public works through a public bank, in this case a US Postal Bank, would eliminate the need to fund the projects with tax dollars. This idea is not new, as it has been proposed by the Public Banking Institute. Its time to cut the Wall Street Banksters out of financing public projects - all they do is add to the cost of such projects by a factor of 40-50%.
+43 # djnova50 2014-02-02 13:23
My parents used to be able to get savings bonds at their local post office. The idea of the USPS acting as a bank wouldn't really be new. I agree with Working Class in that, USPS shouldn't partner with any those big banks. I think post offices across the country could be used for public banking services.
+38 # tm7devils39 2014-02-02 13:38
Great Idea!! Long overdue, but, the Repuglicans and the banking industry will be fighting tooth and nail against this proposal. They want their money...and are willing to lie, cheat and steal to get it.
Two more immoral/unethic al groups can't be found...well, except maybe for Monsanto.
+3 # Even 2014-02-03 06:30
Not just the Republicans but most Democrats in office too.
+37 # Jingze 2014-02-02 13:38
I grew up during WWII. At that time you could bank in the Post Office. I would go with my mother to buy bonds there. It seemed a direct and simple operation. Warren's sound idea would work very well for the poor, especially, and the working public in general.
+19 # soularddave 2014-02-02 14:34
Great! Right after the three post offices closest to me were consolidated 5 miles away (instead of 4 blocks away). Not to mentiin that all the mail boxes are gone.

Good idea, though.
+24 # Jim Young 2014-02-02 14:43
Great way to restore public options and, as Wendel Potter would say, "disintermediat e" the middlemen that inserted themselves between us and usable services at the lowest practical price.
+27 # teineitalia 2014-02-02 15:02
I can hear the compassion-chal lenged conservatives howling over this one already. It's a fabulous idea, but it comes from a progressive thinker, it will help those in economic distress, and therefore, the Repukes will hate it.

I say implement it as soon as possible.
+21 # pegasus4508 2014-02-02 15:23
The reason I love Elizabeth Warren and the "new" progressive Democrats is wonderful, innovative, creative ideas and critical thinking skills. Bravo! Great idea. I can hear Issa now trying to investigate this...
+20 # MidwesTom 2014-02-02 15:27
I wish that this had come up last year before the USPS closed a lot of small town offices. Those are the places most in need.
+7 # keenon the truth 2014-02-02 17:28
You have towns without post offices??!!
+7 # jcdav 2014-02-02 21:29
Hell yes! And there are still moves afoot to consolidate more and eliminate more rural post offices.
+22 # intheEPZ 2014-02-02 15:42
There are really horrible double standards for people of color or low income in this country. Often landlords in low income housing areas require that rent and utilities be paid in cash or money order, they won't take a personal check. So people have to use Western Union and pay a fee every time they want to cash a paycheck or pay their rent or utility bills. People living paycheck to paycheck can't wait for bank's punitive minimum balances and holding periods, even if they can get a checking account. There are many reforms needed. I suspect if one were to research it, we'd find that the civil rights era Community Investment Act has been gutted by the neocons and is in need of renovation. Just like the health ins. industry, the bankers need to be reined in.
+12 # PABLO DIABLO 2014-02-02 17:12
We ALL have to get behind WARREN FOR PRESIDENT and watch her back.
+11 # rhgreen 2014-02-02 17:59
I know it's unAmerican to look at how other places do things, but Singapore had a Post Office Savings Bank (called POSB by the locals) way back when I first went there, in 1983. The Province of Alberta, in Canada, has Alberta Treasury Branch banks all over the place. (The postal system is federal so they can't be in post offices, but it amounts to the same thing.)
+16 # OldRedleg 2014-02-02 18:30
This is a great idea and I understand that there is a history of such services being provided by the Postal Service.

Another service that the USPS should be allowed to provide is that as an Internet Service Provider (ISP) since we are talking about a form of mail, after all.
+16 # Charles3000 2014-02-02 19:20
The post offices did provide banking services during WWII. It is time to do it again.
+16 # travelmait 2014-02-02 19:49
I live in New Zealand 6 mos. of the year and do my banking at the post office. I don't know what the financial arrangement is between NZ Post and Kiwibank but it is very convenient and I know home loans proceed very quickly. And I get 4% interest on term deposits - much better than any bank in the U.S.
+16 # dalelockwood 2014-02-02 20:26
"The Poor Pay More"

This is only one example of the many ways it costs more to maintain oneself with less income in the modern world. That reality is the best argument for a sharply progressive income tax.

But that $89 billion/$2412 per household is great for the bank profit margin/bonuses. They'll resist, tooth and nail.

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