Treasury Releases Report on Postal Banking

The U.S. Department of the Treasury (Treasury) released a report on the future of the United States Postal System (USPS).

Based on the April 12, 2018 Executive Order of the President, the order established a task force on the United States Postal System, chaired by the Secretary of the Treasury and including the Director of the Office of Management and Budget and the Director of the Office of Personnel Management. The Task Force was directed to evaluate the operations and finances of the USPS and to develop recommendations for administrative and legislative reforms that will enable the USPS to create a sustainable business model. Based on the report the task force offered several recommendations that would alter the USPS’s business model to increase the sustainability of the system without increasing costs to taxpayers.

 The Task Force’s recommendations include, but are not limited to:

  • Improving governance by strengthening the Board of Governors and developing enforcement mechanisms to ensure financial commitments and reforms are met;
  • Clearly defining the Universal Service Obligation by specifying what are “essential postal services,” or types of mail and packages for which a strong social or macroeconomic rationale exists for government protection;
  • Developing a new pricing model that removes price caps and charges market-based prices for both mail and package items that are not deemed “essential postal services”;
  • Modernizing the USPS’s cost standards and cost allocation methodology;
  • Pursuing cost-cutting strategies that will enable it to meet the changing realities of its business model;
  • Reforming USPS employee compensation in a manner consistent with proposed reforms to the broader federal workforce;
  • Restructuring retiree health benefit liabilities with a new actuarial calculation that is based on employees at or near retirement age;
  • Exploring new services that will allow the USPS to exact value from its existing assets and business lines, but that present no balance sheet risk.   

While the report generally encourages the USPS to explore new revenue streams, it also directly states the postal service should not pursue an expansion into banking services.

Specifically, the report concludes that “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.”

in Compliance & Regulatory News