In a presidential campaign dominated by controversies over groping women, leaked emails, rigged voting and border walls, a promising idea to help the most vulnerable Americans that began to gain traction during the primaries has fallen by the wayside.
Last fall, Sen. Bernie Sanders (I-VT) proposed using the US Postal Service to offer basic banking services in low-income communities. Post offices, said the then-candidate for the Democratic presidential nomination, could become an alternative for millions of consumers who regularly use payday lenders, check cashing stores and other expensive fringe financial services.
Sanders touted the idea in a high-profile New York speech earlier this year, during his campaign for the Democratic presidential nomination. Sen. Elizabeth Warren (D-MA), a longtime proponent of postal banking, served as a vocal supporter. By the summer, the idea had gained enough prominence that Democrats included it in their official party platform.
“It really was a huge, huge win, and I don’t think a lot of people even realized it,” said Mehrsa Baradaran, a University of Georgia law professor and author of How The Other Half Banks. “There have been people who were working on this for some time, but certainly Bernie brought the nation on board.”
Since then, however, the post office proposal has met the same fate as other poverty-related issues in this contest: It’s not on the agenda.
As The New York Times pointed out, both candidates consistently avoid talking about poverty. Postal banking is no exception. “There’s nothing for either candidate to gain politically by touching it,” said Adam Levitin, a Georgetown University law professor and an expert on financial regulation. “No one’s going to vote for someone because they want the post office to offer banking. And the unbanked aren’t exactly a group with a strong lobby.”
Indeed, the only real mention of the post office so far in this campaign has been of the one Donald Trump turned into the site of his latest luxury hotel in downtown Washington.
It doesn’t mean the post office idea is going away for good. But its declining profile does show the difficulty of generating interest in exploring solutions to the financial problems that plague the lowest-income Americans, who often get chased away from banks by high overdraft fees and turn to sometimes exploitative products outside the mainstream. The post office idea, some poverty experts said, highlighted how little understood the concerns of underbanked Americans are, and the lack of effective solutions for them. Now, with the post office proposal off the political radar, at least in the near term, that’s unlikely to change — another casualty of the 2016 campaign.
“We don’t talk about any policy prescriptions for what we should do for people at the bottom, or even what those people look like,” said Gregory Fairchild, a University of Virginia Darden School of Business professor who researches financial inclusion and underserved markets.
“We don’t really know how they live their lives. We know they spend lots of time in line, but we don’t know how they manage their bills and their money. We don’t even think about how they make financial transactions.”
While agreeing that the problems of unbanked Americans often go unaddressed, others still see an upside remaining from the post office proposal. Sanders, they said, tapped into some of the same money worries middle-class consumers have, potentially creating more incentive to focus on safe financial services for everyone.
“Talking about the unbanked and the underbanked really ties into the conversation about economic insecurity, which stretches up and down the income ladder,” said Justin King, policy director of the Asset Building Program at New America. “The lack of savings, lack of access to helpful and productive financial products and services once were fringe issues. They’ve gotten a lot more attention as a mainstream middle-class issue. It’s starting to percolate in the policy conversation.”
The scandal at Wells Fargo, where employees opened credit card and bank accounts for customers without their permission, also has added to a push by some advocates for the government to more aggressively back financial products and protections. Democratic presidential nominee Hillary Clinton immediately called for a larger government watchdog role after the Consumer Financial Protection Bureau slapped Wells with a record $185 million fine.
“Think of what came out of the Great Depression,” said Joe Valenti, Director of Consumer Finance at the Center for American Progress, a left-leaning think tank. “There was a massive fear of people putting money in banks. So the government came out with deposit insurance and other ideas that that sought to boost public confidence. There’s a similar movement going on now. There’s interest in anything we can do to build public confidence in banks, and to help people manage their money safely and cheaply.”
That interest, however, hasn’t translated into a public debate over the unbanked. And beyond that, postal banking isn’t supported by everyone. Republicans are unlikely to approve any government expansion. Even advocates have practical concerns, such as the Postal Service’s troubled bottom line and poor customer service reputation. Figuring out how, exactly, post offices will handle deposits, short-term loans or collecting overdue payments hasn’t been worked out. Backers point to the Postal Service’s role from 1911 to 1967 in providing basic accounts for consumers as a basis for returning to it. But consumer financial needs now also involve mobile and digital services, raising questions about whether refitting postal buildings would be worth the effort.
In Arlington, Virginia, recently, dental assistant Frew Beku was dashing inside a storefront to buy a prepaid phone card on her way home from work. She said she buys money orders at the post office, and she wouldn’t mind going there for some basic banking services, too. “If I could get a lot done all at once, it would be convenient,” she said. But then again, parking at her local post office is always a hassle, and she got hit with ticket once, so she’s not entirely sold on it.
Beku belongs to the 24 million underbanked households in America, consumers who have bank accounts but also rely on payday lenders or other alternative providers. Their numbers haven’t budged in recent years, but a new survey by the Federal Deposit Insurance Corporation showed an improvement among in the number of Americans with bank accounts. Unbanked households in 2015 totaled 7 percent of all households, down from 7.7 percent in 2013.
But as UVA’s Fairchild and others pointed out, the numbers can’t measure how long consumers will keep these accounts, or the quality of the bank products sold to them. And no one has a good answer yet to what safe and inexpensive financial services are available beyond the payday lenders and check cashers.
Not long ago, Pew Charitable Trusts looked more closely at these questions, holding focus groups with unbanked and underbanked consumers. Contrary to conventional wisdom, Pew found the unbanked work hard to carefully budget; one woman managed her money using a series of Ziploc bags. Others tried, without success, to track their debit card spending to the penny to avoid overdraft fees.
It was a small glimpse into the lives of the unbanked. Sanders provided another by pushing postal banking. In the final stretch of this campaign, that window seems to be shut.