New York Times

AMERICA’S financial landscape is changing before our eyes. The absorption of major Wall Street investment banks by commercial banks threatens to create colossal universal banks that are too big to fail and might need to be bailed out in the future. Meanwhile, the structure of public and private finance in the United States chronically fails to address four problems: the almost 10 percent of Americans without a bank account; the concerns of all Americans about the security of their savings; the growing indebtedness of the country to foreign governments and financial institutions; and underinvestment in public assets like sewer systems and bridges.

These four problems may seem unrelated. But they can be addressed in the United States, as they have been in similar countries, by a single institution that is at once new and old: the postal savings bank.

Britain created the first postal savings bank in 1861, and by the early 20th century many other nations had postal savings bank systems. The details vary among countries, but the idea is simple: use the one government institution that can be found in most neighborhoods and rural areas — the post office — to encourage small savings and a habit of thrift.

Well, we don’t do things that way in America, you might object. On the contrary — we did! In 1910, Congress created a postal savings system. The Post Office offered small savings accounts to individual Americans. The system boomed during the Depression and World War II, with a balance of more than $3 billion in 1947 — almost $30 billion in today’s dollars.

But F.D.I.C. insurance of private bank accounts removed the advantage of security from the postal savings system, and its fixed 2 percent interest rate was uncompetitive. By 1966, deposits had fallen to $344 million (still more than $2 billion when adjusted for inflation) and Congress voted to abolish the system.

A new postal savings system should be part of America’s post-meltdown financial architecture. When Congress created the postal savings system nearly a century ago, one of its goals was to encourage savings among the large number of low-income immigrants. A new system would help today’s immigrants as well as the native poor. Banks are not interested in people with so little money, many of whom are preyed upon by payday lenders and credit card companies.

A postal bank could also supply middle-class and affluent Americans with an extra layer of financial security. The accounts would be limited to a small amount per person. They would provide a government-guaranteed, low-risk, low-return investment, even for those who put most of their financial assets in conventional bank accounts and the stock market.

Non-Western countries like Japan and India have used postal savings systems to reduce their economic dependence on foreign investors. What better way to reduce the dependence of the United States on Asian banks and petrostate sovereign wealth funds than a system that pools the modest savings of ordinary Americans to pay down the national debt?

A revived postal savings bank, in addition to holding much of the national debt, could provide a purely domestic source of savings that could be tapped by a national infrastructure bank. There is growing support for such a government-chartered institution, which could borrow money to modernize roads, power grids and sewage systems; according to one estimate, we need $1.6 trillion over five years. That money is unlikely to come from Congress.

Japan’s postal savings bank, privatized during the heyday of market fundamentalism a few years ago, was criticized because it encouraged too much saving and too much investment in infrastructure. If only the United States had such problems!

When the financial crisis has passed, Americans will need to rebuild our financial system. A new postal savings system should be part of the plan.