Far from benefiting from economies of scale and lower per-unit costs, the USPS has comparably high fixed and operating expenses. This is in part because many of its facilities get very little foot traffic—less than five visits per day for the bottom 15 percent of post offices. But employee compensation accounts for the bulk of the USPS's costs. My colleague Chris Edwards recently quoted figures from the Treasury Department showing that the average USPS employee earns between 10 and 30 percent more than his private-sector counterpart at UPS and FedEx. And there is no reason to assume the new staff hired to run postal banking services would earn any less, since USPS compensation is subject to collective bargaining.

Besides being costlier than many of its proponents assume, postal banking would not address the real reasons the unbanked offer for their plight. Consider, for example, the cost of keeping a bank account. Roughly one third of the unbanked say that not having enough money to keep in an account is their main reason for lacking one, while another 10 percent cite account fees. The reason they do is that around 70 percent of bank accounts offered today require account holders to either maintain a minimum average balance—usually somewhere between $1,000 and $2,000—or have a certain value of monthly direct deposits to avoid a monthly fee somewhere between $7 and $15.

Yet as recently as 2009, 80 percent of accounts had no such maintenance fees. While several developments since 2009 might have contributed to the change, an important recent study blames it on one particular post-crisis regulation: the Durbin Amendment capping debit-card interchange fees. That only larger banks subject to that regulation cut back on free checking and raised account fees is compelling evidence for that explanation. If the Durbin Amendment is indeed at fault, repealing it should promote renewed growth in free checking accounts, financed with interchange fees from accountholders in proportion to their spending, which usually correlates with disposable income.

What about the other reasons the unbanked cite for their situation? Distrust of banks may be a consequence of bad experiences with the banks of other countries, at least among immigrants. If so, their beliefs can only be changed by experience. In the meantime, policymakers could help by allowing firms that the unbanked patronize and trust to offer basic accounts to their customers. The list of well-known and trusted institutions in America is not short, and it includes the USPS but also tech firms—Amazon, Google, and PayPal—private couriers—UPS and FedEx—as well as Chick-Fil-A, Home Depot, and Walmart. And many of these firms have greater foot traffic than post offices, especially among the target unbanked population.

Conclusion: The Strange Persistence of Postal Banking

To paraphrase the USPS's unofficial motto, neither snow nor rain nor heat nor gloom of night—nor the evidence from unbanked surveys—have yet managed to dissuade contemporary proponents of postal banking. But there is no reason to believe that postal banking would significantly lower the number of Americans without bank accounts. That does not mean there are no suitable remedies, but these are more likely to come from innovative tech firms and retailers in the private sector, and from the removal of regulations that have raised the cost of keeping a bank account. Congress was right to end the postal savings system, and it should not reverse this decision more than 50 years later.

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[1] The limit was $2,500 at the time of the passage of deposit insurance legislation. It then rose to $5,000 in 1935, $10,000 in 1950, and $15,000 in 1966 when Congress discontinued the postal savings system. During that period, the maximum balance in a postal savings account was $2,500.

[2] That number does not include undocumented immigrant households, whose members, lacking a Social Security Number, could not open a bank account even if they wished to do so.

This article was first published by the CATO Institute.

Image: Reuters