A recent white paper by the U.S. Postal Service’s Office of the Inspector General floated the idea of introducing postal banking services as a means of expanding financial inclusion. Not surprisingly, the banking industry has rushed to condemn the idea—which would create new competition for financial services—as sort of creeping socialism. But when one considers postal banking more carefully, the idea isn’t so crazy, although it raises a number of real questions and challenges.  

First, the idea of a postal bank is not new to the United States. The USPS successfully operated a postal savings bank from 1911 to 1967. The system was designed as the Republican (!) alternative to federal deposit insurance. The Postal Savings Bank was constrained by its statutory limitations to offering only passbook savings, but in World War II the Postal Savings Bank pioneered new ideas and technologies to help service members, such as deposit by mail.

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