The Post Office is already losing money. Why not have it lose a lot more money by having the Post Office get into the risky loan business? There's no way this can backfire.
Sen. Kirsten Gillibrand (D-N.Y.) is introducing legislation Wednesday that would require every U.S. post office to provide basic banking services, an ambitious step aimed at improving the lives of Americans with limited financial resources.
The bill brings to Congress for the first time a policy idea that has already won the support of liberal economists and anti-poverty activists: Turning the nation’s sprawling network of U.S. Postal Service facilities into places where working-class and low-income Americans who lack adequate access to commercial banking can obtain low-cost, short-term loans.
This was actually Elizabeth Warren's idea. Next thing Gillibrand will be claiming she's Cherokee too. While that's not true, it's undeniable that Gillibrand has never had an original idea in her life.
But this is a particularly stupid unoriginal idea.
The Post Office skill set has nothing to do with making loans. And offering loans to low-income people is a high risk business. That's why it tends to come with high interest rates.
Low-cost, short-term loans is a formula for losing your shirt.
The central goal of the bill is to replace risky financial products like payday loans, which can trap borrowers in prolonged cycles of debt, with regulated alternatives.
“This is a solution to take on payday lenders, to take on the problems that the unbanked have all across the country. It’s a solution whose time has come,” Gillibrand said in an interview with HuffPost.
It's not a solution. It just puts the taxpayers on the hook for a fortune in defaults. And it means that the government will either have to chase defaulting lenders or write off the losses.
With Dems at the wheel, you can guess which one it will be. And then the losses will get so bad, that the rates will shoot way up and collection agents will be hired to aggressively chase that debt. And, one suspects some of them will have Dem connections.
Launching a postal banking system would require startup funding that could either be obtained through a loan from the treasury or a congressional appropriation.
The treasury and congress have no money. The money would come from taxpayers.
A postal banking system could be a major boon to the financially strained Postal Service. If even 10 percent of the money Americans currently spend on interest and fees for risky financial products went toward postal banking loans that cost 90 percent less, the Postal Service would gain almost $9 billion in annual revenue, according to a 2014 study conducted by the Postal Service Inspector General.
And then we'll be eating pie in the sky. Sweet, delicious pie. But... wait a minute.
A study in 2007 by two economists, Mark Flannery and Katherine Samolyk, found that defaults account for more than 20 percent of operating expenses at payday-loan stores.
And yes, that will be on taxpayers.
“It is really an elegant solution,” said Gillibrand, who emphasized that benefits to the postal system, though significant, were a secondary consideration.
Finally, an honest politician.