Fi­nan­cially-strapped Postal Ser­vice won’t ask to boost debt limit

The Washington Times Weekly - - Politics - BY JIM MCELHATTON

Of­fi­cials at the U.S. Postal Ser­vice proudly point out that they don’t take a dime of tax­payer fund­ing, but they do ac­cept bil­lions of dol­lars in gov­ern­ment loans.

With the Postal Ser­vice near­ing its bor­row­ing limit of up to $15 bil­lion from the Fed­eral Fi­nanc­ing Bank (FFB), an arm of the Trea­sury Depart­ment, of­fi­cials say they have no plans to ask to bor­row even more money.

“The Postal Ser­vice has not sought, nor does it have plans to seek an in­crease in its debt limit from the Congress,” postal spokesman Ger­ald J. McKier­nan said.

“The postmaster gen­eral does not be­lieve that the way out of debt is to bor­row more. Fur­ther, the Postal Ser­vice has not sought any mod­i­fi­ca­tions to its cur­rent ar­range­ment with the Fed­eral Fi­nanc­ing Bank,” he said. “FFB funds are bor­rowed and will be paid back.”

Trea­sury of­fi­cials did not re­spond to ques­tions May 24 about what would hap­pen if the Postal Ser­vice couldn’t pay back the money it’s bor­rowed. Two weeks ago, postal of­fi­cials said that with­out in­ter­ven­tion from Congress, the Postal Ser­vice wouldn’t be able to pay some obli­ga­tions, in­clud­ing a loom­ing $5.5 bil­lion pay­ment due for re­tiree health ben­e­fits.

With cash in short sup­ply, the Postal Ser­vice has bor­rowed bil­lions over the years from the FFB, which also is­sues loans to col­leges and uni­ver­si­ties, ru­ral util­i­ties and com­pa­nies such as Tesla Mo­tors and Ford Mo­tor Com­pany. It does not main­tain a re­serve for loan losses.

Ex­cept for the Postal Ser­vice, its loans are backed by the gov­ern­ment. The bank can lend to fed­eral agen­cies for fed­eral agen­cies’ use, or for pri­vate sec­tor en­ti­ties whose loans are guar­an­teed by agen­cies.

“Loan prin­ci­pal and in­ter­est are backed by the full faith and credit of the U.S. gov­ern­ment, ex­cept for loans to the U.S. Postal Ser­vice,” a re­cent FFB fi­nan­cial re­port states. “The U.S. Postal Ser­vice is an in­de­pend- ent es­tab­lish­ment of the ex­ec­u­tive branch. [. . . ] The Bank has not in­curred and does not ex­pect to in­cur any credit-re­lated losses on its loans.”

Mr. McKier­nan

said

the Postal Ser­vice has used its bor­rowed money for “gen­eral pur­poses” over the years.

In a re­cent reg­u­la­tory fil­ing, the Postal Ser­vice noted that it’s lim­ited by statute to net an­nual debt in­creases of $3 bil­lion and that to­tal debt can­not ex­ceed $15 bil­lion.

“It is likely that the Postal Ser­vice will ex­haust its bor­row­ing ca­pa­bil­i­ties with the FFB in Septem­ber 2011,” postal of­fi­cials noted in the re­port to the Postal Reg­u­la­tory Com­mis­sion.

Mr. McKier­nan said postal of­fi­cials are work­ing with Congress to turn around the Postal Ser­vice by ask­ing lawmakers for help ac­cess­ing tens of bil­lions of dol­lars in re­tire­ment fund over­pay­ments and to loosen a man­date to pre­fund re­tiree health ben­e­fits. Of­fi­cials also need per­mis­sion from lawmakers to elim­i­nate home de­liv­ery on Satur­days.

Ear­lier this month, the Postal Ser­vice an­nounced net loss of $2.2 bil­lion for the sec­ond quar­ter, com­pared to $1.6 bil­lion for the same pe­riod in 2010. To­tal mail vol­ume was also down.

“At this time, the Postal Ser­vice has a re­spon­si­ble set of pro­pos­als be­fore Congress which, if en­acted, would pro­vide a clear path to sol­vency,” Mr. McKier­nan said.

MARY F. CALVERT / THE WASH­ING­TON TIMES

Stack­ing a load of debt: U.S. Postal Car­ri­ers sort mail at a post of­fice in An­napo­lis, Md.

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