For example in Chile checking accounts were quite difficult to get for the poor until the state's bank [1] started issuing a bank account to anyone who requested it at $0 fixed cost, at a loss.
This bank also:
- Gives mortgages to sectors of the population in which banks are not interested.
- Partners with small shops to offer financial transactions in low-income or very remote areas [2] or where opening a branch does not make economic sense.
The social benefits are big and out-weight the costs/risks that would not have been taken by a private party. The bank even has healthy profits of around 350 MUSD per year that go back to the chilean state.
Considering that access to financial services is fundamental to participate in the economy, I find it to be an excellent government goal.
In this case it looks more to me a bit similar to the Deutsche Post's Postbank in Germany, that leverages their Post offices to offer financial services.
In many countries post offices act as a generalised "service provider" where third parties can contract to have in-person transactions done.
Often they are processing various transactions for existing banks anyway.
I'm not in the U.S. but yes I expect that Walmart would be a direct competitor in providing these sorts of services.
Walmart may subsidize the service assuming you’ll spend money in store and they’ll get several more dollars out of the transaction. Even less expensive, grocery stores have long done cash checking for free when you check out at the store.
It is hard for me to be upset about a new service that is less expensive than the set of companies gouging people, but has some competitors that are cheaper. I don’t get up in arms over price differences between target and Walmart, why should I between USPS and Walmart?
First, the government does force you to use USPS for some things. The USPS has a monopoly on the delivery of certain types of mail.
Second, we all pay for USPS as taxpayers regardless of whether we use its ancillary services. Well, we won't pay if check cashing is a profitable program, but we will if it's not -- and I'm skeptical that it will be profitable given you have fraud costs, training costs, etc.
> Walmart may subsidize the service assuming you’ll spend money in store and they’ll get several more dollars out of the transaction. Even less expensive, grocery stores have long done cash checking for free when you check out at the store.
To me these are both reasons for the government not to get into this business. If Walmart offers a lower price, whether that's a loss leader or not, it's great for consumers.
IMHO govt services make sense when private industry can't provide them effectively. That doesn't seem like the case here.
> It is hard for me to be upset about a new service that is less expensive than the set of companies gouging people, but has some competitors that are cheaper.
Zero qualms about other companies offering new services. If they work well, those companies will succeed, and if not, they will fail. And success is based on making customers happier than competitors do. That's not the case with government services. If they work well, great, and if not, everyone subsidizes them. For example if a startup launches check cashing and loses $10m because of fraud, they go under. If the USPS ends up losing $1b due to check fraud next year, I'm guessing they'll just ask for $1b more in funding the following year.
And if check cashing seems like a good direction, should the government develop its own reward credit cards? Buy now, pay later? Crypto exchanges? Etc.
The person you were replying to was referring to USPS's upcoming banking services, not their mail services.
> we all pay for USPS as taxpayers regardless of whether we use its ancillary services
We do not. USPS has its own books and does not receive taxpayer funds directly[1][2].
> To me these are both reasons for the government not to get into this business. If Walmart offers a lower price, whether that's a loss leader or not, it's great for consumers.
The problem is not that banking services are unavailable or that Walmart isn't offering them cheaply. It's that Walmart isn't guaranteed to continue to offer them cheaply, and it doesn't serve nearly as many rural places as post offices do.
There are post offices absolutely everywhere in the US. The same is not true of Walmarts.
> IMHO govt services make sense when private industry can't provide them effectively. That doesn't seem like the case here.
25% of Americans are underserved by banking as of a few years ago, so obviously something is wrong that the free market has not been able to solve[3]. Retail banking is not very profitable, so there isn't much incentive for existing banks to do a good job of it.
> I'm guessing they'll just ask for $1b more in funding the following year
Again, that's not how USPS works.
> And if check cashing seems like a good direction, should the government develop its own reward credit cards? Buy now, pay later? Crypto exchanges? Etc.
Ah, so we get to the "what about the slippery slope?!" part of the argument.
It's not black and white. We need to assess each case based on real data, not based on theory. No one is saying the government should compete in every industry just because it wants to cash checks for people who have been exploited by payday lenders.
We have nationalized libraries and schools, but somehow we haven't slipped down the slope to nationalized grocery stores. I think we'll be OK if USPS offers a very simple service that isn't far off from things they already do (like cashier's checks).
1. https://www.brookings.edu/blog/up-front/2020/08/26/how-is-th...
2. https://facts.usps.com/top-facts/
3. https://www.cnbc.com/2019/03/08/25percent-of-us-households-a...
The reason it sometimes looks badly unprofitable is because of an attempt by Republicans to kill it by imposing unique and crushing financial obligations on it that don't apply to any other business[3][4].
By making it look unprofitable, they can argue that it's costing taxpayers money and then propose privatizing it[5]. It's part of a long-term strategize to run government organizations into the ground in order to justify dismantling them.
From Barron's:
> The USPS loses money, but cash flow has been more stable. That is because as mentioned above, the USPS has some unusual expenses, imposed by Congress, that artificially depress earnings.
> In 2006, Congress essentially told the post office to set aside $110 billion over 10 years. That, by our math, is $11 billion a year. The annual free cash flow reported by UPS, for comparison, was about $6.4 billion in 2018.
> The requirement hit cash flow until the post office could deal with the expense no longer. Now the Postal Service just records the cost on its books, cutting into the bottom line, but without setting aside any cash.[3]
1. https://news.nd.edu/news/postal-service-losing-money-because...
2. https://www.nbcnews.com/business/economy/usps-funding-crisis...
3. https://www.barrons.com/articles/usps-louis-dejoy-post-offic...
4. https://en.wikipedia.org/wiki/United_States_Postal_Service#R...
5. https://www.npr.org/2020/08/16/902977021/the-history-of-poli...
Since your whole argument depends on this, I think you need more than a "seems".
Britain, which I'm most familiar with as I lived there before everything could be done electronically, and Europe in general, has/had several services like this available from post offices.
You could pay most bills by taking the bill and cash/cheque to the post office (called "giro"), or transferring from a bank account. A while ago, you could open a Post Office bank account there; nowadays you can make deposits and withdrawals to any UK current account. You could pay fees, taxes and fines, renew a driving license, apply for a passport, and probably 50 other things.
Oh, and send letters and parcels.
Together, all this means the staff have to know how to check someone's identity, and are used to handling cash.
50+ years ago, this was probably a great way to help the economy. Bills paid faster, government services available in every village.
The USA seems about 50 years late for that, so presumably the target is the poorest and/or most rural communities.
Britain is several steps ahead of the USA on privatising government services. Nowadays, many rural or small post offices are just a counter in a convenience shop or small supermarket, as seen here: https://www.cheshire-live.co.uk/news/local-news/little-sutto... (and the whole "Post Office" company is privatized, like in many European countries).
If cash is legal tender, how is it that you can be paid in cheques that nobody would cash for free ? Isn't it the government's job to a) Either cash them for free, or b) Require employers to pay in cash if the employee asks for it ?
I find the fee for cashing a cheque, and most other fees in the US banking system, quite ridiculous.
Not saying that's an unsolvable problem, but I can understand the reluctance.
What type of mail does the USPS deliver that you cannot pay FedEx, UPS, DHL, etc, to deliver?
What is the cost of this service anyway ? Why isn't it close to 0 ? The $5+ fee quoted in this article seems absurd when letter delivery is in cents and $5 will get your stuff delivered across the country with priority mail in under 2 days.
Why? Why does everything have to be about profit? Or even breaking even.
Can't the "profit" be the social good that the service provides?
There are ~ 5,000 Walmart locations in the US vs. more than 30,000 retail Post Office locations.
Because you shouldn't have to pay $2 or whatever to get every paycheck you have cashed. Banks often have minimums in the hundreds to thousands of dollars for checking accounts.
I think all you need to do is considering banking as a basic human right, which can include everything. In addition, you can use race / gender / xx difference to make it an inequality issue, which again can include everything.
Yes, you're right, it is a "dumb question".
The USPS is not "the government". It has certain government mandates, and postal workers are classed as federal employees but to just call it "the government" is not quite right.
They're facing financial difficulties because of pensions and health care plans from another (more civilized) era and not because of bad service.
I don't know if banking is going to work out for the USPS. It makes sense that it's a "pilot program". If it puts slimy check-cashing and payday-loan joints out of business, that would certainly be a good thing.
The idea of the USPS becoming a third party identity service provider has been tossed around before, and they could certainly provide other miscellaneous bureaucratic services. Whatever happens USPS will need to make deep changes, I think, in order to survive.
The USPS exists to serve a constitutional mandate, has its operations overseen by Congress, and 9 out of 11 board seats are appointed by the president. It is a government agency. Or you can read the establishment law, which states it's an establishment of the Executive branch https://www.law.cornell.edu/uscode/text/39/201
https://en.wikipedia.org/wiki/United_States_Postal_Savings_S...