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The Movement for American Banking Independence Starts With Postal Banks

The Movement for American Banking Independence Starts With Postal Banks
Tue, 7/29/2014 - by Marc Armstrong

The National Association of Letter Carriers (NALC) held its biennial convention in Philadelphia last week with over 12,000 people participating. At the 2012 convention, the NALC made postal banking part of the national conversation by passing a resolution in support of the establishment of postal banking in the U.S. Three other labor unions soon passed the same resolution. This July, the NALC invited Marc Armstrong – co-founder of the nonprofit educational organization, Public Banking Institute, and the nonprofit advocacy organization,BankACT – to provide a review of postal banking developments in the last two years. The following is a copy of his prepared remarks.

Two years ago at the Minneapolis convention, the NALC passed a resolution in support of postal banking. The vision and the leadership that you showed has directly led to many exciting postal banking developments. I will briefly review these and then talk about the conversation we need to have in the cities and towns you are located in, in order for the United States to establish a postal bank that provides universal payment and banking services.

Last year the NALC partnered with the Public Banking Institute. We featured postal banking as a part of PBI’s national conference. 700 people learned about our postal banking heritage. Every money order you deliver confirms this heritage -- postal banking is as American as apple pie.

Later in the summer, NALC President Fred Rolando wrote an op-ed calling for the use of postal savings bonds to fund a National Infrastructure Bank. This is a brilliant way to use a postal bank to crowdfund public financing, avoid Washington gridlock, create jobs, and to provide much needed repairs to the roads and bridges we all depend on. After all, our post office heritage stretches back to the building of the post roads throughout New England.

Then, earlier this year, the Office of the Inspector General released its blockbuster report showcasing the need for postal banking. The report called for using technology to automate money orders and to provide other services – imagine if any US Postal Service customer could use the internet or a mobile phone to make payments, use a pre-loaded postal debit card to make store purchases, and use the postal counter to deposit checks.

Over a billion people around the world are free to bank at their neighborhood post office. We stand almost alone among developed countries in keeping 300 million Americans from doing likewise. What we need is American Banking Independence from financial predators, whether they are payday lenders or from Wall Street – and the US Postal Bank can deliver this independence.

Senator Elizabeth Warren went on record in support of postal banking. An action team from the Public Banking Institute immediately launched BankACT, a nonprofit advocacy organization, with the sole focus on postal banking. We are organizing the grassroots effort outside the Washington beltway.

Last month, the US Conference of Mayors passed two resolutions we drafted in support of postal banking. It’s now official policy of this group representing over a thousand American cities and towns.

And, just two weeks ago, the California Democratic Party — the largest state political party in the United States — adopted another resolution we drafted, another call to bring back Postal Banking.

We are all following the brave leadership you showed two short years ago.

Both the Public Banking Institute and BankACT have volunteers who will be personally contacting every mayor in America this fall. We’ll be asking them to go on record in support of postal banking – just as the Conference of Mayors did as a group.

One Conference of Mayors resolution calls for the Postal Service to provide the only low-cost nationwide alternative to payday lenders. The other resolution aims to do just what Fred Rolando suggested: to fund a National Infrastructure Bank using postal savings.

The NALC got this ball rolling – and now it is steamrolling.

I invite you now to lend your voice to this cause. Pick up the phone sometime this next week and call your mayor. Here are three points you can make as you talk to your mayor. I’ll discuss each in detail.

1st point: The government is already in the business of banking.

2nd point: The existing banking system has failed 1 out of 4 American families.

3rd point: Other countries, including Bangladesh and the Ivory Coast, are using mobile phone technology as a platform for postal banking. In other words, the US Postal Service is holding itself back from using technology for the public good. I would add that it goes against every American value to deliberately change our heritage from a culture of “can-do” to “can-not”.

Let’s return to the first point – The government is already in the business of banking.

Every one of us in this conference hall who has a bank savings or checking account knows that, should the bank fail, your money is safe. But it’s safe not because of bankers – it’s safe because of the government. Your bank is between you and the government – and if the bank misbehaves your money on deposit is guaranteed by the full faith and credit of the United States Government.

In other words, banks are the middlemen between us and our government’s guarantee of our deposits.

Take away the government guarantees and the business of banking would be a shell of its former self, a wild west of opportunists and victims, where bank runs would be commonplace.

It is ironic, isn’t it, that some of the staunchest advocates for the so-called “free market” – bankers – are in the business of peddling this government guarantee? And yet we hear from these same people that the government should not get into the banking business?

Let’s be absolutely clear about this – the government is in the banking business. Guaranteeing deposits is not interference with banking – it is the foundation for banking. Full stop.

The second point is that banks have failed one out of four American families – 68 million people do not fully participate in the banking system.

Over the last few decades banks closed many of their retail locations. They were too unprofitable.

S&L Financial, a research firm, reports that banks are increasing the number of branches they operate in areas where the median income is more than $100,000, while steadily reducing the number of branches they operate in areas where the median is under $50,000. Banks are going where the money is, not where the people are.

Check cashers and payday lenders have taken their place, offering low cost payment services, including check cashing, bill paying, money transfers, and payday loans.

Financial predators flock to low-income neighborhoods. A single mile-long stretch in Houston hosts ten such storefronts. One belongs to Cash America, a billion-dollar national chain. The company’s 2012 annual report boasts, “we’ve built a thriving business. . .when, often, our customers have nowhere else to turn.”

In 2012, the average annual income for these families was about $25,300, and they spent an average of $2,400 on interest and fees for non-bank financial services.

Think about that: that is just under 10 percent of their annual income, or about the same amount that they spent on food. This is money that could be spent in other ways to support these families. This is nearly $100 billion a year, or a trillion dollars over a decade – money that could be spent locally instead of extracted by the payday vultures.

As Senator Warren says, “When more than a quarter of this country is spending about the same amount on basic financial services as they are spending on food, we have a market failure.”

My third and final point is this: while we have a public debate about modernizing the existing payment services provided by the US postal service, the rest of the world is passing us by. They are using their post offices as neutral platforms that encourage commerce. We’ve had some recent product innovations, like Forever Stamps, but nothing sweeping like the introduction of zip codes nearly 50 years ago.

This is not true in other countries, developed or not. Switzerland uses its post offices for easy-to-use bill pay. New Zealand offers many different consumer credit products through KiwiBank, its postal bank. The Ivory Coast Post has a suite of mobile banking services.

And the Bangladesh Post is using mobile phones to transfer money. Bangladesh – a country that barely existed when the US Postal Service was organized over 40 years ago – is using mobile phones to transfer money in lieu of the money orders of the US Postal Service.

And the United States? The US Postal Service’s heritage includes a great deal of technological innovations, but unfortunately this does not include postal banking. We need to change this.

So we’ve got a job to do. We will establish a postal bank in this country, but we need to convince our friends and neighbors – and our mayors – that government is already in the business of banking, that the existing banking system has failed the American public, and that it’s about time we automated the postal money order and build a postal bank on top of a solid technology base.

I’m so glad I had the chance to be a part of this important convention. Thank you for all the work you do on behalf of the American public.

 

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