Architect of Postal Banking Proposal Speaks Out

By Wack, Kevin | American Banker, March 31, 2014 | Go to article overview

Architect of Postal Banking Proposal Speaks Out


Wack, Kevin, American Banker


Byline: Kevin Wack

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Art: Photo of David Williams in the card; inside, split photos of Patrick Donahoe and Williams [], with caption:

Section - CF, R&R

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By Kevin Wack

There are a lot of sides to Washington, and from David Williams' vantage point the nation's capital looks far different than it does to folks in the financial industry.

Williams has served for 11 and a half years as the U.S. Postal Service's inspector general. He runs an agency of more than 1,000 people, who in turn oversee more than half a million Postal Service employees. So far this month, his office has published reports on topics like same-day mail delivery and the money that the post office collects from foreign countries when it delivers overseas mail to U.S. residents.

To Williams and his colleagues, "too big to fail" might as well refer to an oversized package that's marked for urgent delivery. A "stress test" could be what happens when customers waiting in a long line at the post office lose their tempers.

So there's a big gap between the world Williams occupies every day and the realm he entered in January, when his office released a paper arguing that the Postal Service should start making small-dollar consumer loans and offering new ways for consumers to save.

The report's ideas were just as loudly panned by banking lobbyists as they were cheered by prominent congressional Democrats. "The paper received a lot of attention," says Williams, a native of the Midwest, in a typical bit of understatement.

In a recent interview, Williams shed new light on the origin of the January report, portraying the Postal Service as having been more involved in the project than the agency has acknowledged publicly. He made clear that he sees the payday loan business as bad for America. And he strongly defended his office's proposal, arguing that the Postal Service should partner with banks to serve rural communities and inner cities.

"Banks have left many areas of the United States. They've pulled back and closed their branches. They obviously didn't do that for any mean-spirited reason. They did it because they weren't able to pay the overhead and make it work. And the same has been true for the Postal Service," Williams said.

"If we joined together, we'd further pool overhead costs. And that would assure that in these areas," he added, "we continue to bind the nation together."

An Old Idea for a New Era

Plans for banking at the post office have a long history in the United States. They've never totally caught on, but also never really died.

The first proposals date back to the 19th Century. Between 1911 and 1967, the Postal Service offered savings accounts before a drop in deposits led to their discontinuation.

During the late 1990s, the Postal Service entered into a partnership with Citigroup (NYSE:C), the goal of which was to provide online financial services for small businesses. But the plan never took off. Today the Postal Service's financial-service products are limited to domestic money orders and international money transfers.

"The idea of offering financial services in post offices is something that has been talked about for a while," said Robert Reisner, a consultant who was the USPS's vice president of strategic planning from 1996 to 2001. "It's been very hard to create new services."

In 2006, it became even more difficult for the Postal Service to enter new businesses, because Congress tightened restrictions on its ability to offer non-postal services. If the Postal Service eventually decides that it wants to move into small-dollar lending, congressional approval would likely be necessary.

Inside the USPS IG's office is a unit called the Risk Analysis Research Center, which conducts research on how the post office should adapt to the 21st century. …

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