The idea of the United States re-instituting postal banking has, happily, received some attention from presidential candidate Bernie Sanders in recent months. The simple and straightforward idea: provide Americans (especially low-income Americans) with an alternative to the bottom feeding payday lenders, finance companies, check cashing outfits and pawn shops that have filled the gap in the market in recent decades after the demise of community banks and savings and loans.
Today, in an excellent essay for The Nation, University of Georgia Law Professor Mehrsa Baradaran (the author of the 2015 book “How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy”) strongly endorses the idea and places it in its historical context. This is from the essay:
“So it’s time to consider a large and national solution to the problem of the unbanked.
Almost every other developed country in the world has found the answer in their post office. What very few people seem to remember is that the United States did it too. In fact, our postal banking system, first proposed in 1871, began in 1910 and banked millions of Americans until 1966, when it was phased out, because this was the heyday of community banking and there was no need for the postal banks….
Postal banking was the most successful experiment in financial inclusion in the United States—a problem in front of us once again. Postal banking brought millions of new immigrants and rural dwellers into the United States banking system.
We are again facing the realization that our banking industry is unstable, but also, more crucially, that it is unfair. Read More