The Postal Bank

The problem

In 2023, 4.2 percent of American households, about 5.6 million, had no checking or savings account, the lowest share since the government began counting and still more people than live in most states. Millions more have an account and do not use it, because the fees, the minimum balances and the overdraft charges make it more expensive than the cheque-casher on the corner. The unbanked pay a fee to cash a paycheque, a fee to buy a money order, a fee to pay a bill, and, when the money runs out before the month does, the fee № 083 described, at 400 percent a year. The Postal Service's own inspector general estimated a decade ago that the underserved spent on the order of $100 billion a year on fees and interest for financial services that a bank account makes nearly free.

The reason is geography as much as price. Bank branches have been closing for fifteen years, fastest in rural counties and poor urban ones, and there are now counties with no branch at all. There is no county with no post office. The Postal Service operates 30,972 retail offices, in every town of any size and most of no size, staffed, open six days a week, and already handling money orders, cash and the identity checks that opening an account requires.

It has done this before. The Postal Savings System took deposits from 1911 to 1967, paid 2 percent, and at its peak in 1947 held nearly $3.4 billion, about $45 billion today, much of it from immigrants and rural families who trusted the post office when they did not trust a bank. Congress closed it because the banks had caught up. The banks have now retreated, and the counter is still there.

There is a second reason, and it is this catalog's own. № 001 proposes a dividend to every citizen; № 017 fixes the day it arrives; № 069 and № 077 add cheques of their own. A payment to every citizen needs an account for every citizen, and the country does not have one. The Postal Bank is the rail the dividend runs on.

The proposal

The Postal Bank: a basic account for any citizen or lawful resident, opened at any post office, with a debit card, direct deposit, bill payment, and cheque cashing at cost. Deposits held at the Treasury, not by the Postal Service, so that the accounts carry no credit risk and need no deposit insurance. Small loans of up to $1,000 at the Military Lending Act rate of № 083, underwritten and funded by partner credit unions and community lenders through the postal counter. The Fund's dividend is deposited here by default.

How it would work

1. The account. Any citizen with the card of № 051, or any lawful resident with the credential of № 003, opens an account at the counter in minutes. No minimum balance, no monthly fee, no overdraft: a transaction that would overdraw is declined. A debit card that works everywhere. Bill payment and direct deposit. Cheque cashing at the cost of processing, a fraction of a percent.

1. The Treasury holds the money. The Postal Service is the counter, not the bank. Balances are held in accounts at the Treasury, as Treasury already holds accounts for the public through its savings bond and direct-payment systems, so that no deposit is ever at risk and no insurance is needed. The Postal Service is paid a fee per account and per transaction for the service it provides, which is the service it is built to provide: a trusted counter in every town.

1. The dividend lands here. Every citizen has a Postal Bank account by default when the dividend of № 001 is first paid; a citizen with another account may redirect the payment. The Default Account of № 087 and the Baby Share of № 008 can be viewed and managed at the same counter. The catalog's payments, which today would require either a paper cheque or an account at a bank the citizen may not have, arrive in one place.

1. The small loan. A loan of up to $1,000, repayable over up to twelve months, at a rate within the Military Lending Act cap, offered at the counter and funded by a partner credit union or community development lender that carries the credit risk and is paid for it. The Postal Service does not lend and does not decide; it presents the offer and takes the payments. This is the alternative № 083 promised: a legal small-dollar loan on the same street as the payday shop, in the building that was there first.

1. What it does not do. No mortgages, no business lending, no investment products, no accounts above a balance cap of about $100,000. The Postal Bank is the ground floor of the financial system, for the people the upper floors have left, and it competes with community banks for nothing they want.

1. Paid for by use. The Postal Service is paid per account and per transaction by the Treasury, at a rate set to cover its cost plus a margin; the loan partners pay a fee for the counter. The inspector general's estimate was that financial services could bring the Service several billion dollars a year. The Postal Bank is not a subsidy to the Postal Service, and it is not a subsidy from it; it is a line of business the Service is uniquely placed to run.

The numbers

The customers. 5.6 million unbanked households; on the order of 15 million more underbanked, who have an account and use cheque-cashers and payday lenders anyway. Perhaps 20 million households who would use the counter.

The fees they pay now. The Postal Service's inspector general put the underserved market's spending on alternative financial services at about $100 billion a year in 2014; the figure has not been updated and is likely lower now, and still enormous. A household cashing $30,000 of paycheques a year at 2 percent pays $600; at the Postal Bank, a few dollars.

The Service's revenue. The 2014 estimate was about $9 billion a year in new revenue at scale, against annual losses that have run to $9.5 billion. The proposal does not assume the full figure; a third of it would cover the counter's cost and more.

The cost to the Treasury. The per-account fee, at perhaps $50 a year for 20 million accounts, is about $1 billion, offset by the end of paper cheques and the cost of delivering the dividend by any other means, which is comparable.

The honest objections

"The Postal Service cannot run a bank; it can barely run the mail." It does not run the bank under this proposal; the Treasury holds the money and partner lenders carry the credit. The Service runs the counter, which is the one thing it does well in 30,972 places. The 2021 pilot that offered cheque cashing in four cities and drew a handful of customers is the objection's evidence, and it is evidence about a product nobody was told existed, capped at $500, paid out as a gift card. That was not a bank. This is.

"This is government competition with community banks." The Postal Bank offers a basic account with a balance cap, no lending of its own, and no products above the ground floor, to customers who by definition do not have a bank. A community bank that wants those customers may compete for them on price, as it may now; most do not, which is why the counter is needed.

"Deposits at the Treasury are a step toward a government that sees every transaction." The strongest objection, and the design answers it the way № 051 answers the same objection to the card: the accounts are held under a statute that forbids the Treasury from using transaction data for any purpose but running the account, that forbids joining it to any other database, and that makes doing so an offence. The alternative, in which the unbanked carry cash and pay to convert it, is not privacy. It is poverty.

"Payday lenders exist because their customers cannot get credit anywhere else, and a credit union partner will decline them too." Some will be declined, and the honest answer is that a loan a person cannot repay at 36 percent is a loan that should not be made at 400. The partners will lend to more people than banks do, because the counter lowers their cost of finding customers and taking payments, and the ones they decline are not helped by the lender down the street either.

"Congress closed the Postal Savings System for a reason." It closed it in 1967 because banks had branches everywhere and paid more interest. Banks have since closed the branches. The reason has reversed, and the conclusion should reverse with it.

Sources

• Federal Deposit Insurance Corporation, 2023 National Survey of Unbanked and Underbanked Households
• United States Postal Service, Postal Facts: Total Retail Offices, fiscal 2025
• United States Postal Service Office of Inspector General, Providing Non-Bank Financial Services for the Underserved (RARC-WP-14-007), 2014, and The Road Ahead for Postal Financial Services (2015)
• Steven Sprick Schuster, Matthew Jaremski and Elisabeth Ruth Perlman, "An Empirical History of the United States Postal Savings System," NBER Working Paper 25812; Smithsonian National Postal Museum, The 20th Century: Postal Savings System
• Mehrsa Baradaran, How the Other Half Banks (Harvard, 2015)
• Proposals № 001 (The American Dividend); № 003 (The Open Door Compact); № 008 (Baby Shares); № 017 (Dividend Day); № 051 (The Citizen Card); № 083 (The Soldier's Rate); № 087 (The Default Account)