Memo: The Case for Postal Banking
By Mehrsa Baradaran Professor of Law at University of California, Irvine School of Law
Executive Summary
Income inequality in the United States is worse than ever, a divide deepened by the coronavirus pandemic and the government’s inadequate response. The mainstream banking industry has reinforced economic disparities by excluding the poor from financial services that would help them escape poverty. Private banks, though heavily subsidized by the federal government, are designed to maximize profits. Efforts at forcing the banking sector to provide credit and services to low-income individuals and communities have failed because these services are not profitable. The result is that one in four American households are unbanked or underbanked, forced to rely on usurious, unregulated fringe lenders and services.
The United States Post Office (USPS) could resolve this market mismatch by offering basic banking and credit services. Postal banking is not a new idea—for several decades, including during the Great Depression, we had a Postal Savings System—but it is particularly important given the financial crisis facing both our most vulnerable populations and the Post Office itself.
