Demand for services from the U.S. Postal Service has tanked and projections show the customer exodus will continue. No surprise then that the USPS is losing an estimated $25 million per day. Despite this reality, some members of Congress are thwarting efforts to cut service, which means they’re engaging in an unwise effort to save the candlestick maker from the light bulb.
The Postal Service originally sought to close low-revenue post offices in rural areas to save money but after public opposition agreed to keep 13,000 open with shorter operating hours. The Postal Service also is delaying the closing of many mail processing centers, originally set to begin this spring. The estimated annual savings of $2.1 billion won’t be realized until the full cuts are completed in late 2014.
The postal uncertainty offers opportunities for banks, which can save up to one-third of the cost of processing checks if payments are made electronically. JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc. (C) and Wells Fargo & Co. (WFC) have been urging electronic transactions.
“This could be a watershed event to motivate consumers and businesses to stop writing checks,” said Rodney Gardner, head of global receivables at Bank of America, who recently reviewed the topic at a conference with insurance companies.
The Postal Service, which releases third-quarter financial results next week, has projected a record $14.1 billion loss for the year. It expects to avoid bankruptcy in October only by defaulting on the two health prepayments, totaling $11.1 billion. It faces a cash crunch again next year.
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