Public and postal Banking Proposals Show our Advocacy Work is Never Finished
As our nation celebrates the contributions of community banks and small businesses during the months of April and May, I wanted to put our work in perspective:
Small businesses are the key to America’s economic recovery. And no institution has a greater incentive or responsibility for small-business success than America’s community banks.
Last year, America’s community banks reinforced their value to the world, as local bankers worked thousands of hours to deliver billions of dollars in pandemic relief to small businesses in order to keep the heart of America’s economy beating.
As members of Congress grapple with next steps to reinvigorate the US economy, your insights are invaluable because you were on the front lines during the pandemic. You have a finger on the pulse of your local economy and communities.
Community bankers across Pennsylvania recently gathered virtually in April to meet with members of Pennsylvania’s congressional delegation.
PACB arranged a dozen meetings with federal lawmakers, including Senators Casey and Toomey, to empower community bankers to share their voice and the perspective of their institution as to how federal issues affect Main Street.
The message delivered during these meetings was clear: community banks need a level playing field to compete and help America’s small business ‘engine’ roar back to life and to help the communities we serve regain sound financial footing.
This message is more relevant than ever.
A group of federal lawmakers are pressing for a pilot project to test a postal banking system. They believe that allowing people access to some banking functions such as paying bills and making deposits and withdrawals at their local post office will help people who don’t have ready access to traditional banks.
Editorial boards at major newspapers in Philadelphia and Pittsburgh have embraced the public- and postal-bank options, arguing this was “done before and it could work again.”
While increasing U.S. financial inclusion and improving U.S. Postal Service financial stability are important objectives, postal banking would accomplish neither.
For one, the postal service’s footprint is insignificant compared to existing financial institutions. The nation’s roughly 31,000 post offices fall short of its more than 157,000 financial institution branches and 470,135 ATMs — undermining postal banking’s case for expanding inclusion.
Further, the postal service’s poor financial condition, government subsidies, and significant outstanding debts suggest it is ill-equipped to handle financial services.
The Government Accountability Office says USPS lost $87 billion over the past 14 years with an unsustainable business model. Adding deposit-taking and lending would only place taxpayers at further risk.
Finally, last year’s USPS discussions with JPMorgan Chase suggest postal banking could just end up involving a too-big-to-fail financial institution. Ultimately, this would displace community banks and further the trend of banking industry consolidation, which harms local communities.
Postal banking would have a limited effect on financial inclusion while exacerbating USPS deficits and putting taxpayer funds at risk. Utilizing institutions already dedicated to promoting financial inclusion would be more successful.
Policymakers would more effectively expand access to financial services by bolstering community banks, which already serve 97% of low-income and economically distressed counties. Specific proposals already exist that would provide regulatory relief to promote new bank formation and minority depository institutions as well as targeted tax reforms to support rural lending.
PACB has worked hard this session engaging members of Congress and the state Legislature on a variety of important reforms to strengthen our community banking industry. At a time when we are seeing strong movement on PACB priorities at the federal and state level, proposals like a public bank in Philadelphia and postal banking show that our work is never finished.