April 02, 2015
Charles Lane doesn’t want the Postal Service to get involved in banking. That much is clear from his column, even if his argument doesn’t necessarily support the case.
The argument seems mostly that the government can’t compete with the dynamic private sector, although he also seems to worry about the opposite:
“(Yes, postal banking also undermines check-cashing liquor stores and pawn shops, a desirable goal if you buy into the stereotype that these are unscrupulous exploiters, as opposed to family-run small businesses, that the government would be crushing.)”
Hmmm, some of these operations are sizable chains. But yes, some are also family run, like the juice loan racket. Not sure of the point here exactly, but certainly a well-run postal bank would put a lot of sleazy operators out of business.
But most of the case seems to be that the Postal Service can’t compete. He tells readers:
“Yet postal banking’s long history should actually be a red flag: Can we really resolve the cash-flow issues of the 21st century’s ‘under-banked’ population based on a business model from the 19th century?”
My recollection is that the Post Office cut back its banking services because the banking industry didn’t want the competition, not because they were unable to compete. This is similar to the efforts of UPS and FedEx to extinguish an effective Postal Service marketing campaign highlighting the fact that Express Mail offered a similar service for a quarter of the price. If Lane is telling us that the affected businesses will be able to use their political power to stifle effective competition then he has a point, but that is different from saying that a publicly run postal bank can’t compete.
To those who think the Postal Service can’t both make a profit and service an under-served population, Lane says:
“Supporters [of postal banking] say ‘both,’ which simply shows that they learned nothing from the last great federally backed effort to make money by cheapening credit for the masses, Fannie Mae.”
Let’s see, Fannie Mae went bankrupt as a privately owned company that was pursuing profits for its shareholders and paying its top executives more than $10 million a year. After the government put it into conservatorship it repaid its debts and has been earning billions of dollars a year for the government. What are we suppose to learn from this exactly?
To assure readers that low dollar loans will never be profitable, he turns to a study by the consulting group Bretton Woods. It’s not worth going into great detail, but it is worth noting that the study argues strongly for federal preemption of state laws that regulate payday lenders. This was the same argument that prevented many states from attempting to crack down on subprime lenders in the housing bubble years.
Anyhow, we know that Charles Lane doesn’t like postal banking. I’m not sure what else this column tells us.
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