Saving the Post Office: The Models of Kiwibank and Japan Post

Neither rain nor sleet nor snow may have stopped the Pony Express, but the nation’s oldest and second largest employer is now under attack.  Claiming the Postal Service is bankrupt, critics are pushing legislation that would defuse the postal crisis by breaking the backs  of the postal workers’ unions and mandating widespread layoffs.  But the “crisis” is an artificial one, created by Congress itself.  

In 2006, Congress passed the Postal Accountability Enhancement Act (PAEA), which forced the USPS to put aside billions of dollars to pay for the health benefits of employees, many of whom hadn’t even been hired yet.  Over a mere 10 year period, the USPS was required to prefund its future health care benefit payments to retirees for the next 75 years, something no other government or private corporation is required to do.  As consumer advocate Ralph Nader observed, if PAEA had never been enacted, USPS would now be facing a $1.5 billion surplus.     

The USPS is a profitable, self-funded venture that is not supported by the taxpayers.  It is funded with postage stamps—one of the last vestiges of government-issued money.  Stamps are fungible and can be traded at par; and they are backed, not by mere government “fiat,” but by labor.  One stamp will buy the labor to transport your letter 3000 miles. 

The USPS is one of the few businesses the government is allowed to operate in competition with private companies; it is the only U.S. agency that services all its citizens six days per week; and it is perhaps the last form of communication that protects privacy, since tampering with it is against federal law.  In 1999, it employed nearly a million people; and today, it employs over 600,000.  Where are those workers to go, when the post office is no more?

To Downsize or Diversify? 

Whatever caused the financial woes of the USPS, there is another way to mitigate the crisis than slashing employee benefits and customer services.  In a December 21st article in Reader Supported News, Tim Fernholz suggested that instead of focusing on cuts, the post office should approach the problem from a business perspective and find a new way to make money.  One way to keep the USPS alive, he says, is for it to include basic banking services in its product line, providing a “public option” in banking:

[R]oughly 9 million Americans don’t have a bank account and 21 million rely largely on fringe financial services like usurious check cashers rather than traditional financial institutions. Giving low-income people access to a safe banking system will firm up their economic futures. 

The Proud, Forgotten History of Postal Banking

Banking in post offices is not new.  Many countries, including Germany, France, Italy, Japan, and New Zealand, have a long and successful history of it; and so does the United States. 

From 1911 to 1967, the U.S. Postal Savings System provided a safe and efficient place for customers to save and transfer funds.  It issued U.S. Postal Savings Bonds in various denominations that paid annual interest, as well as Postal Savings Certificates and domestic money orders.  The U.S. Postal Savings System was set up early in the 20th century to attract the savings of immigrants accustomed to saving at post offices in their native countries, provide safe depositories for people who had lost confidence in private banks, and furnish more convenient depositories for working people than were provided by private banks.  (Post offices were then open from 8 a.m. to 6 p.m. six days a week, substantially longer than bankers’ hours.)  The postal system paid two percent interest on deposits annually.  The minimum deposit was $1 and the maximum was $2,500.  Savings in the system spurted to $1.2 billion during the 1930s and jumped again during World War II, peaking in 1947 at almost $3.4 billion. 

The U.S. Postal Savings System was shut down in 1967, not because it was inefficient but because it was considered unnecessary after private banks raised their interest rates and offered the same governmental guarantees that the postal savings system had.

The Kiwibank Model: Postal Banks to Serve Local Communities

Postal banks are now thriving in New Zealand, not as a historical artifact but as a popular new innovation.  When they were instituted in 2002, it was not to save the post office but to save New Zealand families and small businesses from big-bank predators.  By 2001, Australian mega-banks controlled some 80% of New Zealand’s retail banking.  Profits went abroad and were maximized by closing less profitable branches, especially in rural areas.  The result was to place hardships on many New Zealand families and small businesses.

The New Zealand government decided to launch a state-owned bank that would compete with the Aussies.  They called their new bank Kiwibank after their national symbol, the kiwi bird.  But the government team planning the new bank faced major challenges.  How could they keep costs low while still providing services in communities throughout New Zealand?  

Their solution was to open bank branches in post offices.  Kiwibank was established as a subsidiary of the government-owned New Zealand Post.  The Kiwibank website states:

Back in 2002, we launched with a thought: New Zealand needs a better banking alternative—a bank that provides real value for money, that has Kiwi values at heart, and that keeps Kiwi money where it belongs—right here, in New Zealand.

So we set up shop in PostShops throughout the country, putting us in more locations than any other bank in New Zealand literally overnight (without wasting millions on new premises!). 

Suddenly, New Zealanders had a choice in banking.  In an early “move your money” campaign, they voted with their feet.  In an island nation of only 4 million people, in its first five years Kiwibank attracted 500,000 customers away from the big banks.  It consistently earns the nation’s highest customer satisfaction ratings, forcing the Australia-owned banks to improve their service in order to compete.

Postal Banking Japan-style: Funding the Government’s Debt with Its Own Bank

Another interesting model is Japan Post Bank, now the largest publicly-owned bank in the world.  Japan Post is also the largest holder of personal savings, making it the world’s largest credit engine.  Most money today originates as bank loans, and deposits are the magic pool from which this credit-money is generated.  Japan Post uses its excess credit power to buy government bonds.  By 2007, it was the holder of one-fifth of the nation’s debt.  As noted by Joe Weisenthal, writing in Business Insider in February 2010:

Because Japan’s enormous public debt is largely held by its own citizens, the country doesn’t have to worry about foreign investors losing confidence.

If the U.S. Postal Service were to add commercial banking to its product line, it too could use its own bank-generated credit to help relieve its debt problems. The USPS is being forced to fund the health care costs of its employees for 75 years into the future, and a large portion of this unreasonable burden is composed of interest charges.  According to German researcher Margrit Kennedy, interest composes on average about 40% of the cost of all goods and services. That suggests that eliminating interest could reduce the USPS debt by about 40%.  If the USPS became a bank, it could use the credit generated from customer deposits either to service its own debt directly—something that would effectively be interest-free, since it would own the bank and would get the profits back—or by buying interest-bearing government bonds.  The interest earned on the bonds could then be used to pay the interest on the USPS debt.

Other government agencies and local governments could improve their balance sheets in the same way.  Public institutions with sizeable capital and revenues can cut their infrastructure costs by about 40% by establishing their own banks, allowing them to avoid a massive toll in interest to private banker middlemen.    

The Post Office Deserves to Be Preserved

 The U.S. Postal Service is a venerable institution that is older than the Constitution.  It should be saved, and it can be saved.  One way is to support HR 1351, a bill introduced by Rep. Stephen Lynch of Massachusetts to repeal the Postal Accountability Enhancement Act. 

Another way is for the post office to combine mail services with teller services, restoring the Postal Savings System of an earlier era.  The result could be not only to save the Post Office but to establish a competitive alternative to a runaway Wall Street banking monopoly that even Congress seems unable to control.


Ellen Brown is an attorney and president of the Public Banking Institute,  In Web of Debt, her latest of eleven books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back.  Her websites are and

14 Responses

  1. >>Stamps are fungible and can be traded at par; and they are backed, not by mere government “fiat,” but by labor. One stamp will buy the labor to transport your letter 3000 miles. <<

    Stamps are not backed by labor but by *service*. Labor is input; service is output. Bridge tolls, subway fares, phone minutes and “Forever” postage stamps are examples of Service-backed, Service-denominated Money. SBDM, for short.

  2. Indeed expanding the post office to allow them to provide banking makes total sense. Problem is, the current private bankers own our politicians. Campaign bribes, don’cha know. Nothing that makes sense has a chance of passing. Only a 100% turnover in November will allow a fix to the corruption.

  3. Wow! Every Ellen Brown article leaves me with the response, “This is her best article yet!”

    There are so many powerful ideas that Ellen points to and documents that demand professional cost-benefit analyses for immediate application to states and national economics. The answers are powerful and practical. The gap between what the “1%” economic/political US leadership does and refusal for professional consideration of these ideas is prima facie evidence of the 1% using their power to transfer the 99%’s wealth to themselves.

    The solution is for all of us to stand for sound ideas and justice.

  4. […] Brown Web of Debt  About Ellen BrownEllen Brown is an attorney, president of the Public Banking Institute, […]

  5. I’ve become a follower of modern monetary theory. And it seems to me that the Post Office is a federal operation that could be funded
    by the government by simply printing the money to support it.
    The idea that taxes are needed to support spending fails to
    understand that with fiat money the sovereign has no problem with
    funding its own operations with its own currency. Taxes are needed
    to get people to use the money to pay their taxes with and to control
    inflation by taking money out of the economy. So, there should be
    no concern about finding a way to pay for the post office operation.
    However, this need not mean that stamps should be paid for by the
    government so that all mail delivery is free. Requiring consumers to pay for stamps (as before) is like a tax, designed to control the use
    of the services.

    Or the government could pay for the retirement program.

    Congress is using the wrong metaphors in assuming that government
    finances are like household, business or state finances. None of
    those can create their own money but have to get it elsewhere.
    The government creates its own money. That power has existed
    since 1971 when Nixon took the government off the gold standard.
    But economists, politicians, the public have failed to recognize the
    implications of this and are using the wrong models in their reasoning
    about government finances.

    • Well put, Stanley. I heartily agree. And just as stamps can continue to be used in postal operations as a tool, interest can continue to be used in public banking. Purists who who see it as an absolute evil that must be rooted out are simply wrong.

    • Wrong metaphor is right. I’m amazed that Conservatives don’t get called on the carpet when they say that government should be run like a business and that, therefore, businesspeople should be elected to public office.

      In the next breath, Conservatives argue that government should be shrunk and its reach severely limited.

      That’s not much of a business model, is it? Businesses want to grow as much as possible and dominate as much economic territory as possible. How does the run-government-like-a-business rhetoric square with the keep-government-small rhetoric?

      It doesn’t. This fundamental aspect of Conservative ideology is incoherent.

  6. regarding Federal Spending , here is a Question that deserves an answer … The FHA lawsuit for 196 Billion dollars that was filed on the 17 banks for fraudulent Home Loans made to Unqualified borrowers is suppose to be what caused the 2008 economic collapse right ??? So if thats the amount of money that caused the 2008 collapse then why did TARP need 787 Billion , Plus 2 Stimulus bills and an Omnibus Bill and a QE1 &2 from the Fed that added up to over 4 trillion and still counting ?

    Full-Blown Civil War Erupts On Wall Street – Financial Elite Start Turning On Each Other

    Reality Finally Hits the Financial Elite as They Start Turning On Each Other
    By David DeGraw –

  7. Let’s support Our Post Office and protect Our rights. EVERYONE buy a stamp and make visible proof of who you’ve VOTED for, this upcoming elelction. Put a stamp on it and mail in your vote this year!!! Two birds one stone.

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  9. I loved this article. It highlights and calls out the need for two very important changes that are urgent: saving the post office, and creating public banks.
    First, regarding the post office, if we could restore the postal savings system we had prior to 1967, that would be a great way to keep the post office going. Right now, it’s really hard to get even 1% on a savings account. I have checked with many private banks and my credit union. I can not believe the ridiculous miniscule interest rates they are offerring . At present, people have not only lost confidence in private banks: THEY ARE FED UP WITH THEM. If a post office bond or savings certificate were available now, I would definitely invest in them.
    Combining mail services with teller services is an ingenious idea. I would like to see the post office thrive, and I would like to have public banks in states, cities and counties. And I definitely do not think we should privatize the post office.
    I agree with author Ellen Brown that we need to support HR1351, repealing the Postal Accountability Enhancement Act (the title of which is so absurd). The Post Office is a very responsible and accountable institution, and the name of this act itself is insulting and outrageous. We ought to make some of those banks and corporations as responsible and accountable as the post office is. And next, as Ellen also suggests, we should preserve the post office and restore what we had until 1967 – the practice of buying bonds and certificates at the post office.
    Jan. 9, 2012

  10. One look inside your mail box will tell you what the business of the Post Office is. It is ADVERTISING. Just increase those rates, cut back to 3 days/week and you are in business.

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