The postal service is a
necessary function that must reach every household. There is no
magic here or any opportunity for cherry picking. Because of this it
is the natural partner for any critical service that must also be
provided to every household. Banking is one such service that is now
succumbing to cherry picking and failing to reach the last third of
the population. Medical insurance is also an equivalent service that
has been successfully cherry picked to exclude a third of the
population.
Obviously, the post
office could equally take on both retail banking and retail medical
insurance with their infrastructure in place and operate at a low
cost.
It does not benefit
society to not provide banking and medical insurance to the last
third of society because it introduces huge levels of hardship
preventing that last third to expand their productivity.
Integrating postal
banking with the very successful micro lending model is also an
obvious value proposition because it clearly empowers that third of
society and brings them all swiftly into middle class life ways.
We can improve even on
that, but this is still core to an optimized society everywhere.
Confronting
Wall Street: Establishing a Democratic Public Postal Banking System
in America
Letter Carriers
Consider Bringing Back Banking Services
by Ellen Brown
On July 27, 2012, the
National Association of Letter Carriers adopted a resolution at their
National Convention in Minneapolis to investigate establishing a
postal banking system. The resolution noted that expanding postal
services and developing new sources of revenue are important to the
effort to save the public Post Office and preserve living-wage jobs;
that many countries have a successful history of postal banking,
including Germany, France, Italy, Japan, and the United States
itself; and that postal banks could serve the 9 million people who
don’t have bank accounts and the 21 million who use usurious check
cashers, giving low-income people access to a safe banking system. “A
USPS bank would offer a ‘public option’ for banking,” concluded
the resolution, “providing basic checking and savings – and no
complex financial wheeling and dealing.”
The USPS has been
declared insolvent, but it is not because it is inefficient (it has
been self-funded throughout its history). It is because in 2006,
Congress required it to prefund postal retiree health
benefits for 75 years into the future, an onerous burden no other
public or private company is required to carry. The USPS
has evidently been targeted by a plutocratic Congress bent on
destroying the most powerful unions and privatizing all public
services, including education. Britain’s 150-year-old postal
service is also bon the privatization chopping block, and its postal
workers have also vowed to fight. Adding banking services is an
internationally proven way to maintain post office solvency and
profitability.
Serving an
Underserved Market, Without Going Broke
Many countries operate
postal savings systems through their post offices, providing
people without access to banks a safe, convenient way to save.
Great Britain first offered this arrangement in 1861. It was
wildly popular, attracting over 600,000 accounts and £8.2 million in
deposits in its first five years. By 1927, there were twelve million
accounts—one in four Britons—with £283 million on deposit.
Other postal banks
followed. They were popular because they serviced a huge untapped
market—the unbanked and underbanked. According to a Discussion
Paper of the United Nations Department of Economic and Social
Affairs:
The essential
characteristic distinguishing postal financial services from the
private banking sector is the obligation and capacity of the postal
system to serve the entire spectrum of the national population,
unlike conventional private banks which allocate their institutional
resources to service the sectors of the population they deem most
profitable.
Serving the unbanked
and underbanked may sound like a losing proposition, but numerous
precedents show that postal savings banks serving low-income and
rural populations can be quite profitable. (See below.)
In many countries, according to the UN Paper, banking revenues are
actually crucial to maintaining the profitability of their postal
network. Letter delivery generates losses and often requires
cross-subsidies from other activities to maintain its network. One
effective solution has been to create or expand postal financial
services.
Public postal banks
are profitable because their market is large and their costs are low:
the infrastructure is already built and available, advertising costs
are minimal, and government-owned banks do not award their management
extravagant bonuses or commissions that drain profits away.
Profits return to the government and the people.
Profits return to the
government in another way: money that comes out from under mattresses
and gets deposited in savings accounts can be used to purchase
government bonds. Japan Post Bank, for example, holds
20% of Japan’s national debt. The government has
its own captive public lender, servicing the debt at low interest
without risking the vagaries of the international bond market.
Fully 95% of Japan’s national debt is held domestically in
one way or another. That helps explain how Japan can have the
worst debt-to-GDP ratio of any major country and still maintain its
standing as the world’s largest creditor.
Some Examples of
Successful Public Postal Banks
Kiwibank:
New
Zealand’s profitable postal bank had a return on equity of
11.7% in the second half of 2011, with net profits almost trebling.
It is the only New Zealand bank able to compete with
the big four Australian banks that dominate the New Zealand financial
sector.
In fact, it was set up
for that purpose. By 2001, Australian mega-banks controlled some 80%
of New Zealand’s retail banking. Profits went abroad and were
maximized by closing less profitable branches, especially in rural
areas. The New Zealand government decided to launch a
state-owned bank that would compete with the Aussie banks. To
keep costs low while still providing services throughout New Zealand,
the planning team opened bank branches in post offices.
In an early version of
the “move your money” campaign, 500,000 customers transferred
their deposits to public postal banks in Kiwibank’s first five
years—this in a country of only 4 million people. Kiwibank
consistently earns the nation’s highest customer satisfaction
ratings, forcing the Australia-owned banks to improve their service
to compete.
China’s Postal
Savings Bureau:
With the assistance of
the People’s Bank of China, China’s Postal Savings Bureau was
re-established in 1986 after a 34-year lapse. As in New
Zealand, savings deposits flooded in, growing at over 50% annually in
the first half of the 1990s and over 24% in the second half. By
1998, postal savings accounted for 47% of China Post’s operating
revenues; and 80% of China’s post offices provided postal savings
services. The Postal Savings Bureau has served as a vital link
in mobilizing income and profits from the private sector, providing
credit for local development. In 2007, the Postal Savings Bank
of China was set up from the Postal Savings Bureau as a
state-owned limited company that provides postal banking services.
Japan Post Bank:
By 2007, Japan Post
was the largest holder of personal savings in the world,
boasting combined assets for its savings bank and insurance arms of
more than ¥380 trillion ($3.2 trillion). It was also the
largest employer in Japan. As in China, Japan Post recaptures
and mobilizes income from the private sector, funding the government
at low interest rates and protecting the nation’s debt from
speculative raids.
Switzerland’s Swiss
Post:
Postal financial
services are by far the most profitable activity of Swiss Post,
which suffers heavy losses from its parcel delivery and only marginal
profits from letter delivery operations.
India’s Post Office
Savings Bank (POSB):
POSB is India’s
largest banking institution and its oldest, having been established
in the latter half of the 19th century following the success of
the postal savings system in England. Operated by the
government of India, it provides small savings banking and financial
services. The Department of Posts is now seeking to expand
these services by creating a full-fledged bank that would
offer full lending and investing services.
Russia’s PochtaBank:
Russia, too, is
seeking to expand its post office services. The head of the
highly successful state-owned Sberbank has stepped down to take on
the task of revitalizing the Russian post office and create a
post office bank. PochtaBank will operate in the Russian Post’s
40,000 local post offices. The post office will function as a banking
institution and compete on equal footing not only with private banks
but with Sberbank itself.
Brazil’s ECT:
Brazil instituted a
postal banking system in 2002 on a public/private model, with the
national postal service (ECT) forming a partnership with the nation’s
largest private bank (Bradesco) to provide financial services at post
offices. The current partnership is with Bank of Brazil. ECT
(also known as Correios) is one of the largest state-owned companies
in Latin America, with an international service network reaching more
than 220 countries worldwide.
The U.S. Postal
Savings System:
The now-defunct U.S.
Postal Savings System was also quite successful in its day.
It was set up in 1911 to get money out of hiding, attract the savings
of immigrants, provide safe depositories for people who had lost
confidence in private banks, and furnish depositories with longer
hours that were convenient for working people. The minimum
deposit was $1 and the maximum was $2,500. The postal system
paid two percent interest on deposits annually. It issued U.S.
Postal Savings Bonds that paid annual interest, as well as Postal
Savings Certificates and domestic money orders. Postal savings
peaked in 1947 at almost $3.4 billion.
The U.S. Postal
Savings System was shut down in 1967, not because it was
inefficient but because it became unnecessary after its profitability
became apparent. Private banks then captured the market,
raising their interest rates and offering the same governmental
guarantees that the postal savings system had.
Time to Revive the
U.S. Postal Savings System?
Today, the market of
the underbanked has grown again, including about one in four U.S.
households according to a 2009 FDIC survey. Without access to
conventional financial services, people turn to an
alternative banking market of bill pay, prepaid debit cards and check
cashing services, and payday loans. They pay excessive fees for basic
financial services and are susceptible to high-cost predatory
lenders. On average, a payday borrower pays back $800 for a $300
loan, with $500 going just toward interest. Low-income adults in the
U.S spend over 5 billion dollars paying off fees and debt associated
with predatory loans annually.
Another underserviced
market is the rural population. In May 2012, a move to shutter
3,700 low-revenue post offices was halted only by months of
dissent from rural states and their lawmakers. Banking services
are also more limited for farmers following the 2008 financial
crisis. With shrinking resources for obtaining credit,
farmers are finding it increasingly difficult to stay in their homes.
It is clear that there
is a market for postal banking. Countries such as Russia and
India are exploring full-fledged lending services through their post
offices; but if lending to the underbanked seems too risky, a U.S.
postal bank could follow the lead of Japan Post and use the credit
generated from its deposits to buy safe and liquid government bonds.
That could still make the bank a win-win-win, providing income for
the post office, safe and inexpensive depository and checking
services for the underbanked, and a reliable source of public funding
for the government.
Ellen Brown is an
attorney and president of the Public Banking
Institute, http://PublicBankingInstitute.org. In Web
of Debt, her latest of eleven books, she shows how a private cartel
has usurped the power to create money from the people themselves, and
how we the people can get it back. Her websites
arehttp://WebofDebt.com and http://EllenBrown.com.
1 comment:
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