Public Banks: Postal Banking, Fed Accounts, and State-Owned Banks
There a persistent interest among certain lawmakers in allowing the United States Postal Service (USPS) to offer retail banking services. It would be a serious mistake for the USPS to enter a highly competitive, complex new industry with the potential to ruin itself and its core function and put American taxpayers at further risk.
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Position & Background
ICBA opposes the provisioning of deposit services and the allocation of credit to consumers, businesses, non-profits, or governmental entities by any federal, state, or quasi-federal or state instrumentality.
Community banks offer affordable accounts for unbanked and underbanked consumers, raising questions about the need for FedAccounts and their ability to attract consumers. Financial services are best provided in a competitive, private, and free marketplace that openly and efficiently benefits customers.
In recent years, several states and localities around the country have considered proposals to create public banks to operate in competition with the thousands of existing private, for-profit, taxpaying banks that serve our communities.
Public banks create undue risk and exposure for taxpayers. Their deposits, if they choose to forgo or are not provided access to FDIC deposit insurance, would be backed by the full faith and credit of the state or municipality that chartered them, posing substantial risks to taxpayers, a risk heightened by lack of federal supervision. Further, such banks would be subject to political manipulation as favored groups would receive credit and other services on preferential terms. Credit should be allocated on an impartial basis to ensure sound lending and a competitive economy.