New York City U.S. Post Office branch (Image: Shutterstock).
A coalition of New York community, labor and civil rights groups has endorsed a proposal to allow the U.S. Postal Service to provide banking services, but with a twist.
The proposal by the New Economy Project, would not allow the Post Office to offer short-term, small-dollar loans; many other proposals include payday alternative loans as a centerpiece.
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"As banks continue to redline New York neighborhoods — perpetuating poverty, inequality, and segregation — bold solutions like postal banking are clearly needed," the coalition said. "Some recently-introduced proposals, however, would exacerbate our two-tiered financial system and promote debt as a solution to people's financial struggles."
The project singles out legislation that Sen. Kirsten Gillibrand (D-N.Y.) introduced during the last Congress. That plan would have established banks in all Post Offices; those banks would have offered short-term, small-dollar loans.
Now that Gillibrand has entered the race for the Democratic presidential nomination in 2020, her plan may garner more attention.
In the House, Rep. Alexandria Ocasio-Cortez (D-N.Y.) has said she wants to use her seat on the House Financial Services Committee to explore the idea.
However, Rep. Patrick McHenry (R-N.C.), the new ranking GOP member on the panel is vehemently opposed to postal banking and a postal task force appointed by President Trump nixed the idea.
The idea of placing banks in Post Offices is not a new idea. Credit union trade groups have opposed the idea, saying that they are perfectly positioned to offer the services a postal bank would offer.
The trade groups have said, however that their field-of-membership restrictions would have to be loosened in some cases.
But the New York group said postal banking can provide an important service.
"Postal banking can help pave the way for public banking, more broadly, as we work to create a just financial system," the coalition said.
And the New Economy Project said that postal banks should complement community development financial institutions and learn from them.
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