A Case for Public Banking in the United States

And how the USPS can help

With the recent failures of a long list of private banks, including Slicon Valley Bank, Credit Suisse, and Signature Bank, maybe it’s time to take a look at public banking instead. Public banking, the concept of banks owned and operated by the government, has a long and varied history around the world. While public banks are relatively common in many European countries, they are less well-known in the United States. However, there is growing interest in the U.S. in the potential benefits of public banking, particularly as a means of promoting economic development and financial inclusion. In this article, we will explore the history of public banking, its advantages and disadvantages, the role of public banks in promoting economic development and financial inclusion, and the potential for creating public banks in the United States through the United States Postal Service (USPS).

What is Public Banking? 

Public banking is a concept that is unfamiliar to many Americans, but it has a long and storied history around the world. At its core, public banking refers to banks that are owned and operated by the government, rather than by private individuals or corporations. In many cases, these banks are created with the explicit goal of promoting economic development and financial inclusion, by offering lower interest rates and greater access to credit than traditional commercial banks. In this article, we will explore the history of public banking, its advantages and disadvantages, the role of public banks in promoting economic development and financial inclusion, and the potential for creating public banks in the United States through the United States Postal Service (USPS).

History of Public Banking

The concept of public banking can be traced back to early banks in Europe, such as the Bank of Amsterdam, which was created in 1609 to facilitate trade and commerce. Over time, public banks became more common in Europe, with many countries creating state-owned banks to provide credit to small businesses and farmers. In the United States, public banking has a more complicated history. While the country's first bank, the Bank of North America, was privately owned, many of the country's early banks were created by state governments to finance infrastructure projects such as canals and railways. However, the role of public banks in the United States changed over time, and today there are relatively few public banks operating in the country.

Public Banking: Pros & Cons

Like any financial institution, public banks have both advantages and disadvantages. On the positive side, public banks can offer lower interest rates for borrowers, since they are not driven by the profit motive that motivates commercial banks. In addition, profits generated by public banks can be returned to the public, rather than being distributed to shareholders. Finally, public banks can offer greater control over local economies, since they can focus on providing credit to specific regions or industries.

On the negative side, public banks are vulnerable to political influence, which can lead to mismanagement or corruption. In addition, public banks are subject to the same risks as commercial banks, including the risk of default on loans. Finally, public banks may lack the competition that is present in a market-driven banking system, which can lead to inefficiencies.

How Public Banks Promotes Economic Development and Financial Inclusion

Despite these potential drawbacks, there is growing interest in the role that public banks can play in promoting economic development and financial inclusion. Case studies from around the world have shown that public banks can be effective at providing credit to small businesses and underserved communities, which may be neglected by commercial banks. In addition, public banks can help to stabilize local economies, by providing credit to key industries and promoting job growth.

Compared to traditional commercial banks, public banks also have a greater degree of transparency and accountability, since they are owned by the government and subject to public scrutiny. Finally, public banks can help to reduce the power of large commercial banks, which can dominate local markets and restrict access to credit for small businesses and individuals.

The Bank of USPS

One potential avenue for creating public banks in the United States is through the United States Postal Service (USPS). The USPS has a long history of providing financial services to Americans, including money orders, international remittances, and savings accounts. In recent years, there has been growing interest in the potential for the USPS to offer more extensive financial services, including banking.

The USPS is uniquely positioned to provide banking services to underserved communities, since it has a presence in virtually every town and city in the country. In addition, the USPS is already trusted by millions of Americans to handle their mail and other important documents. By offering banking services, the USPS could provide a low-cost, accessible alternative to traditional commercial banks, particularly for individuals and small businesses in rural areas or low-income communities.

While the concept of postal banking is not new, there have been few concrete proposals for how it could be implemented in the United States. However, some advocates have proposed a "public option" for banking, in which the government would create a new network of public banks that could compete with traditional commercial banks. This network could be established using the existing infrastructure of the USPS, or it could be created from scratch.

The public USPS banks would be owned and operated by the government, and they would be mandated to provide affordable banking services to all Americans, regardless of their income level or credit history. The public banks would be funded by a combination of government investments and customer deposits, and they would be able to lend money at lower interest rates than traditional commercial banks.

One of the main advantages of a public option for banking is that it could provide a low-cost, accessible alternative to traditional commercial banks, particularly for individuals and small businesses in rural areas or low-income communities. Public banks could also be mandated to invest in local communities, which could help to spur economic development and job creation.

Another main advantage of having a public banking system is that once it is set up, it makes it that much easier to implement policies like Universal Basic Income, as the universality of the USPS system will allow all Americans access to a bank account from which they can receive UBI. 

Conclusion

Overall, the public option for banking is a complex and controversial issue, and there are valid arguments on both sides of the debate. However, as more and more Americans struggle to access affordable banking services, it is clear that there is a pressing need for innovative solutions to promote financial inclusion and economic growth. By using the existing infrastructure of the USPS, the government could provide low-cost, accessible banking services to millions of Americans who are currently underserved by traditional commercial banks. If implemented effectively, a public banking system could promote economic growth, reduce inequality, and increase financial stability for all Americans.