October 8, 2015
A Postal Savings Bank: Infrastructure That Doesn’t Cost Taxpayers a Dime
Posted on Sep 23, 2013
By Ellen Brown, Web of Debt
Expanding to include postal financial services has been crucial in many countries to maintaining the profitability of their postal network. Maintaining post offices in some rural or low-income areas can be a losing proposition, so the postal service often cross-subsidizes with other activities to maintain its universal network. Public postal banks are profitable because their market is large and their costs are low. The infrastructure is already built and available, advertising costs are minimal, and government-owned banks do not reward their management with extravagant bonuses or commissions that drain profits away. Profits return to the government and the people.
Wall Street Is No Longer a Safe Place to Keep Our Money
A postal bank could have appeal not just to the unbanked but to savers generally who are concerned about the safety of their deposits. Traditionally, people have deposited their money in banks for three reasons: safety from theft, the convenience of check writing and bill paying, and to earn some interest. Today, not only do our bank deposits earn virtually no interest, but they are not safe from theft – and the prospective thief is Wall Street itself.
The Financial Stability Board (FSB) in Switzerland has mandated that “systemically important” banks come up with “living wills” stating what they would do in the event of insolvency. The template set out by the FSB is for these too-big-to-fail banks to confiscate their creditors’ funds and convert them to bank equity or stock. Legally, “creditors” include the depositors. In fact depositors compose the largest class of creditors of any bank.
Square, Site wide
In 2009, President Obama agreed along with other G20 leaders to be bound by the regulations imposed by the FSB, giving them the force of law. This agreement should properly have been a treaty, subject to the approval of two-thirds of the Senate; but the deal was sealed on a handshake, ostensibly to prevent another Lehman-style banking collapse. Thus the next time JPMorganChase or Bank of America finds itself on the wrong side of a massive derivatives bet, it can avoid insolvency by recapitalizing itself with our deposits. Both JPM and BOA hold over $1 trillion in deposits and over $70 trillion in derivatives; and with the repeal of Glass-Steagall, the banks have been able to merge these operations. The FDIC deposit insurance fund has only $32 billion in it to cover losses for the entire country.
For guaranteed safety, we need a network of publicly-owned banks devoted solely to taking deposits and providing check-cashing services – no gambling with deposits allowed. The US Post Office can safely and efficiently provide the infrastructure for such a banking network, as it did from 1911 until 1967. The post office is ubiquitous, with branches in every town and community.
A Proven Model
Postal banking systems are also ubiquitous in other countries, where their long record of safe and profitable public banking has proved the viability of the model. The mother of all postal banks was in Great Britain in the 19th century. The leader today is Japan Post Bank (JPB), now the largest depository bank in the world. Not only is it a convenient place for Japanese citizens to save their money, but the government has succeeded in drawing on JPB’s massive deposit base to fund a major portion of the federal budget. Rather than using its deposits to back commercial loans as most banks do, Japan Post invests them in government securities. That means the government is borrowing from its own bank and its own people rather than from foreign bondholders.
That is the basic idea behind the national postal savings and infrastructure bank. The deposits of the nation’s savers can be invested in government securities that are in turn used for rebuilding the nation. It is a win-win-win, providing a way to save the post office while at the same time protecting our deposits and rebuilding our decaying roads and bridges without dipping into taxes. It is also a way to vote with our feet, moving our money out of an increasingly risky and rapacious Wall Street into a network of publicly-owned banks that serves rather than exploits us.
Another Option: Rescind the Prefunding Requirement
Another alternative for putting the USPS in the black, of course, is simply to rescind the healthcare pre-funding requirement that put it in the red. The mandate to fund healthcare 75 years into the future appears so unreasonable as to raise suspicions that the nation’s largest publicly-owned industry has been intentionally targeted for takedown. Why? Is it because competitors want the business, or because private developers want the valuable postal properties that are being systematically sold off to meet its now-crippled the budget?
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