Talk about killing two birds with one stone; here's an idea that can take down a whole flock.
It's called postal banking, and it could help rescue the Postal Service, make banks nicer to the little guy, raise the national savings rate and cut the cost of financing the national deficit.
This is not a new idea. A vast array of nations from Germany to India offer their citizens financial services through the post office. We do too, a little, by selling money orders and package insurance. But we used to do much more.
From 1910 to 1967 Uncle Sam ran the Postal Savings System. It paid 2 percent on deposits (which peaked at $3.4 billion in 1947) and reaped 2.5 percent by putting the money into local banks, thus covering the cost of operations. Customers could save as little as 10 cents at a time by filling a postal savings card with stamps and then turning it in for credit.
Consider the possibilities. The Postal Service is in financial trouble partly due to meddling by Congress, but also because the digital revolution is driving down mail volume. Congress wants the place run like a business, but won't let the service set prices, close money-losing outlets or otherwise be businesslike. The government, meanwhile, backstops the for-profit banking system without charging for this valuable service. These same banks treat low-income customers like pinatas, beating fees out of them at every turn.
The postal banking alternative is old, established and could easily work here. There are post offices all over America, and they already handle lots of cash. Postal deposits could be invested in Treasury securities for ironclad safety, and these new funds would likely reduce Uncle Sam's cost of borrowing, saving money for taxpayers. Instead of the certificates used by the old Postal Savings System, depositors would get debit cards.
A postal bank could make money in several ways. Users could pay modest fees for checking and other services, and the system could pay out less in interest than it earns on the Treasuries it would buy.
Since the goal isn't to drive banks out of business, individual accounts could be capped at some appropriately modest sum, and there would be no loans except to Washington. Even so, this new postal competition should force banks to treat their smaller customers a little better -- while rescuing many poor Americans from the teeth of costly check-cashing outlets and payday lenders.
Could postal banking be big enough to make a dent in Postal Service deficits? Well, the Japanese postal bank has more than $2 trillion in deposits, and the United States is nearly three times as populous. It's not inconceivable to imagine an American postal bank throwing off an annual profit of $5 billion, which is what the Postal Service lost in its last fiscal year (although losses seem to be accelerating).
Besides, aiding the Postal Service is the least of the plan's virtues -- and postal banking by itself can't save the system, which needs to change regardless. More important is that postal banking would put the government once again on the side of encouraging thrift. People with savings don't need payday lenders, after all. Accumulating capital can help them weather emergencies, start businesses and buy homes.
A postal savings system would give people a trusted place to save right in their own communities, without outrageous fees or sales pitches for tricky products. Postal banking could take its place alongside other cherished non-market institutions, such as Social Security and public libraries, that help Americans help themselves. People love their libraries. Why not let them bank on their Postal Service?
Daniel Akst is a member of the Newsday editorial board.