A Post Office is Not a Bank!
In the past few weeks, the U.S. Postal Service has quietly begun piloting banking services—such as check cashing, bill paying and ATM access— in Washington, DC; Falls Church, Virginia; Baltimore, Maryland; and the Bronx, New York.
This is one "pilot" that should be grounded before it takes off.
The USPS is the same organization that's billions of dollars in debt and is considering slowing the delivery of mail across the nation because it can’t keep up. You may therefore be asking, "What can be slower than snail mail?" We may be about to find out.
The Postal Service needs to get its act together and deliver the mail, not get into financial services that it neither understands nor is equipped to provide.
To be sure, there is a genuine concern that many Americans are “under-banked.” According to the Federal Deposit Insurance Corp., about 8.4 million households in the US are totally “un-banked,” and 24.2 million more are “under-banked”—meaning they have limited or no access to bank accounts, or ready access to financial services such as check cashing, ATM access, bill paying, money orders and wire transfers.
But let’s consider a root cause of this.
The number of un-banked households increased dramatically as the number of community banks across the nation failed -- even though community bankers play a critical role in providing credit, liquidity and investments to their communities.
The number of community banks in the US has been declining for the past two decades. In 1997 there were 10,700 banks in the US; in 2016 there were 5,600, and today there are fewer than 4,740 banks across the country.
Why did so many community banks close or agree to be acquired, and why are there so few new community banks opening up? I’ll tell you one big reason—the regulatory burden. Over the years, the government and regulators have created onerous requirements for banks, regardless of size or complexity. The government has set forth so many rules and requirements that it's very difficult to run a small bank efficiently and make a buck.
Logic and a sound mind would suggest that the government and regulators address the problem of “under-banked” Americans by promoting a comeback in community banks by scaling back on the regulatory requirements for smaller, more traditional and less complex banks. Perhaps small community banks should be treated more like credit unions, which don't pay federal taxes and have less stringent requirements on data collection for bank secrecy and fraud reporting.
Community banks understand their communities, they are set up and experienced in banking, and have a track record.
Unlike the United States Postal Service.
Community banks were established in a democratic, capitalist nation to serve all types of folks. Over time, the government disrupted that purpose when it applied all kinds of rules to all banks, regardless of size, with many of the same burdensome requirements. Small banks can’t keep up with the rules. The answer to the concern of serving the un-banked, is to lighten the load for small community banks.
Opening up banks in a rapidly defunct post office makes zero sense. Take this idea and RETURN TO SENDER.
Virginia Varela is President & CEO of Golden Pacific Bank in Sacramento, California and Vice Chair of Friends of Traditional Banking