Democrat Rep. Ocasio-Cortez and Sen. Bernie Sanders are trying to push a bill known as postal banking, where post offices would be authorized to carry out financial services.

Last summer, Senator Kirsten Gillibrand (D-N.Y.), another 2020 candidate, introduced a bill that would authorize post offices to offer financial services, including the ability to grant short-term loans.

“Post offices exist in almost every community in our country,” Sanders wrote in a blog post. “There are more than 31,000 retail post offices in this country. An important way to provide decent banking opportunities for low-income communities is to allow the U.S. Postal Service to engage in basic banking services.”

Some of the proposed services a postal banking system could offer include low-interest loans, checking and savings accounts, debit cards, check cashing, bill payment, ATM services, online banking services and electronic money transfers.

The measure was framed as a way to prevent lower-income Americans from falling victim to predatory payday lending practices – and from having to rely on Wall Street’s largest institutions.

In a report on reforming the Post Office released by the Treasury Department earlier this year, the government came out against a postal banking option.

“Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued,” the report stated.

Currently, people can go to the Post Office for money orders. In the past, the agency offered Americans the options of opening savings accounts – but that policy ended in the late-1960s.

The debate on postal banking reemerged in the national dialogue about 5 years ago, when it was suggested by the Post Office’s Office of Inspector General. In responseOpens a New Window. to the recommendation, the Post Office said its core function was delivering, not banking.

Sanders is not the only presidential candidate that has endorsed postal banking. New York Sen. Kirsten Gillibrand and Massachusetts Sen. Elizabeth Warren have also advocated for the idea.

The Postal Service, meanwhile, is bleeding red ink. Losses between 2007 and 2018 are about $69 billion. The last time the agency recorded a profit was more than a decade ago. It has also defaulted on more than $40 billion in payments owed to pre-fund retiree health care expenses.

During recent testimony before lawmakers, Postmaster General Megan Brennan said the agency’s Board of Governors is working on a plan to reform operations – and shore up its finances. Meanwhile, experts have recommended closing locations in some rural areas as part of a strategy to put the Post Office on a path toward financial stability.

However, these are not the only reasons Ocasio-Cortez and Sanders came up with this harebrained idea. Rather, postal banking would be a backstop to the potential effects of their proposal to cap credit card interest rates at 15 percent. The current median credit card interest rate in 17.73 percent; for those with low credit scores, the average is about 25 percent.

As Peter Suderman observes at Reason, one likely effect of the socialists’ proposal is credit card issuers cutting off poorer people with lower credit scores, although poorer people generally understand their finances and often rely on high-interest financing for emergencies.

Suderman also notes that when options like payday lending go away, pawn shops proliferate. He could have added that withdrawing access to high-rate credit products can result inhigher rates of bounced checks and personal bankruptcies.

Indeed, if credit card issuers decided to continue serving poor credit risks at artificially low rates to keep the socialists happy, one likely result would be more spending by credit risks, eventually resulting in increased bankruptcies. Credit card companies are already raising rates and lowering credit limits for riskier customers in anticipation of the next economic downturn.

In legislation unveiled last week, which also aims to cap credit card interest rates at 15 percent, the pair of self-identified Democratic Socialists said postal banking could provide relief to low-income Americans.

The Democratic caucus already has internal friction between the progressives and the moderates. The latter may not be keen to support a proposal dreamed up by America’s two most prominent socialists, particularly when one is running for president.

On the other hand, the House Financial Services Committee, chaired by Rep. Maxine Waters (D-CA), is considering a national 36 percent annual percentage rate cap aimed at payday loans. If advancing that bill means attacking an African-American entrepreneur for being racist, Democrats will do that too. Similar legislation is being considered in California.

Ocasio-Cortez and Bernie may feel free to be this ignorant and irresponsible, given that their bill would almost certainly die in the Republican-controlled Senate. The interesting question is whether it would pass in the House.

Alabama’s Republican Gov. Kay Ivey signed the state’s new abortion bill into law on Wednesday. It effectively bans the procedure, including in cases of rape and incest, and has sparked widespread anger around the world. That law is the most severe in a wave of bills in several states that aim to outlaw most abortions.

Ocasio-Cortez claimed earlier this week that the ban was really about “controlling women’s sexuality” and “owning women.”

Once it became clear that Sanders wouldn’t win the nomination, a few of his former staffers formed a group called Brand New Congress. The goal was to recruit progressives who weren’t wealthy, well–connected white men to run for the House and Senate so that a future progressive President would have allies in the legislature.

Saikat Chakrabarti, now Ocasio-Cortez’s chief of staff, and Corbin Trent, now her communications director, began soliciting names of working-class leaders who might be willing to run. In the end, they got some 11,000 nominations from across the country. One of them was a letter from Gabriel Ocasio-Cortez, 26, touting his older sister Alexandria. She fit the mold exactly.

“We looked at the brother telling the story of a sister who wasn’t a giant nonprofit executive, she didn’t go work on the Hill for 10 years,” recalls Alexandra Rojas, now executive director of Justice Democrats, an organization allied with Brand New Congress. “She was someone who watched her family struggle through the financial crisis.”


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