Issue

Reform of the U.S. Postal Service.

Position Statement

ABA supports efforts to reform the U.S. Postal Service. In particular, ABA supports proposals to help keep postage rates down and opposes any proposal that would allow or encourage the Postal Service to offer services in competition with private-sector financial services firms or to discriminate among customers on the basis of size, volume, or location.

Explanation

Despite advances in electronic delivery of financial services, the financial services industry remains a major customer of the Postal Service. Postal costs are a major expense for banks, and banks depend on a healthy and reliable Postal Service to serve their customers.

Since 1970, Congress has considered a number of reforms to the operation of the Postal Service to increase its flexibility in the face of increased competitive pressure from other forms of communication. These reforms include enhanced pricing flexibility, a more business-like corporate governance structure, outsourcing of functions that can be more efficiently provided by the private sector, and infrastructure improvements.

On December 20, 2006, President George W. Bush signed into law the Postal Accountability and Enhancement Act of 2006, which is the first major overhaul of the U.S. Postal System since 1970. The bill updates the operating systems and steadies the pricing of products, while giving the Postal Service a business-like flexibility and authority to respond to sudden economic changes. However, the legislation also seeks to protect businesses and mailers by ensuring that price increases are kept below an inflation-based ceiling.

In addition to allowing the Postal Service to introduce new and customer-tailored products, the measure solidifies the organization's finances by repealing the provision in law that required the Postal Service to be responsible for its employees' military pension benefits. The measure returns this financial obligation to the U.S. Treasury. Additionally, the measure corrects a flawed pension system which has historically led to gross overpayments and higher rates. The new formula will free up billions of dollars and enable the organization to pay down its debts.

ABA will continue to urge that the Postal Service not be allowed to compete with private-sector financial services firms. Additionally, ABA will continue to advocate that the Postal Service not impose higher costs on small banks, banks that generate relatively light mail volume, or banks located in relatively remote locations.

Contact for further information: Vincent Barnes (202) 663-5230.