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REwired

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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Lending

Should the Post Office become a Too-Big-to-Fail?

Postal banking services could reach underserved communities

February 10, 2014

It employs more than 600,000 people, generates $65 billion in revenue and operates through 31,000 facilities. And if it's not Too Big to Fail already, it may yet soon be...

The United States Postal Service is trying to harness the depths of its reach and help both itself and Americans financially.  

In a recent white paper by the USPS's Office of the Inspector General, the USPS announced its latest idea: offering nonbank financial services.

In its argument, the USPS said, “postal financial services could complement the current offerings from banks by helping banks reach customers in geographic areas where they lack a physical presence, by offering products to customers who were not previously a main focus of banks, and by helping some customers transition to traditional bank savings or checking accounts.”

So the Postal Service is thinking of becoming a (non)bank?

Approximately 68 million adults — one quarter of all U.S. households — make up the entire underserved population, and in 2012 alone, they spent about $89 billion just on interest and fees for alternative financial services.

“The millions of citizens currently struggling would have new ways to conduct their financial transactions. Nonbank financial services from the Postal Service could help these people to gain more financial security, and help foster a culture of savings,” the postal service noted.

But it would not just be a win for the community.

“If even 10% of what the underserved currently spend on interest and fees instead went to more affordable offerings from the Postal Service, it could lead to $8.9 billion in new revenue per year,” USPS said.

And while this may seem like an odd proposition, it is not the first of its kind.

The United Kingdom post offices currently service citizens’ mailing and financial needs, and even goes to the extent of offering mortgages. That hasn't helped as the Royal Mail was recently privatized.

According to the UK Post Office, “Our aim is to provide customers with the things that are important to them — from mail to their broadband package, from car insurance to their savings account. Whether customers come into a branch, are on the move or shop online, we work hard to deliver a great experience.”

However, not everyone in the industry is completely sold on the idea.

Camden Fine, president and CEO of the Independent Community Bankers of America, argued against the idea in his blog saying, “Sometimes an idea comes along that is so bad — so half-baked and ill-considered — that it should be politely heard…and then squashed outright before it has a chance to gain any traction.”

“The truth is that this proposal is a dead letter. It raises a pile of problems and appears to be a last-ditch effort to save the struggling government agency from bankruptcy and taxpayer-funded bailouts,” Fine added.