A People’s Bank at the Post Office

Steve HutkinsNews

JSTOR Daily: Post offices in the United States used to host the Postal Savings System. It was a form of non-profit savings bank and existed from 1911 to 1966. Historian Christopher W. Shaw tracks the “life and death” of this public bank, which gave “a measure of financial security” to small depositors and allowed for a “reimagining of the basic order of the financial system.”

“Millions of Americans deposited their earnings at the local post office,” Shaw writes, noting that

these savers sought the security that the national government’s guarantee of their deposits afforded. Bankers had lobbied hard against the Postal Savings System’s establishment and opposed subsequent efforts that workers and farmers made to expand the institution.

In fact, the “banking fraternity would maintain its enmity toward the government’s savings bank” for its half-century lifespan. Bankers finally killed it off in 1966, ironically aided by the New Deal’s rescue of their for-profit banking systems and the post-WWII “decline in popular political engagement with economic issues.”

The first postal savings system was set up in Great Britain in 1861. As Shaw details, the demand for postal savings in the US came out of the fierce struggle between workers/farmers and bankers in the late nineteenth century. Such entities as the Knights of Labor, American Federation of Labor, the National Grange, and the People’s Party all championed the idea of an alternative to for-profit banking. In the words of the New York State Knights of Labor, the nation needed a Postal Savings Banks to keep people’s monies “safely from the itching palms of the stock-jobbing bank officials.”

Like many of the compromises in the unending battle of the many versus the elite few, the 1910 Postal Savings Bank Act was modest. The system could operate “only in designated post offices, redeposit its funds in existing banks, and pay a noncompetitive 2 percent interest rate,” Shaw writes. There was also a $500 deposit ceiling. And virtually no money was ever spent on publicizing the service.

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