The Treasury Department agreed to loan the U.S. Postal Service $10 billion in emergency coronavirus relief funding on Wednesday in exchange for proprietary information about the mail service’s most lucrative private-sector contracts.
The Postal Service, subject to confidentiality restrictions, will provide Treasury copies of its 10 largest “negotiated service agreements,” or contracts with high-volume third-party shippers such as Amazon, FedEx and UPS, and receive a crucial injection of cash that postal officials say will keep the debt-laden agency solvent for at least another year, according to a copy of the loan’s term sheet obtained by The Washington Post.
The Postal Service contracts with private-sector shippers for “last-mile” delivery from distribution centers to consumers’ homes, and it offers those firms small discounts because of the volume of packages they provide.
Amazon founder and chief executive Jeff Bezos owns The Washington Post.
President Trump has derided the agency over those deals, which industry experts say only account for marginal cost savings, calling the Postal Service Amazon’s “delivery boy” and falsely claiming the agreements are the reason the agency has struggled financially.
Trump in April called the Postal Service “a joke” and said he would not approve any emergency funding for the agency unless it quadrupled package prices, a move postal financial experts say would quickly bankrupt the agency by chasing customers away to private-sector competitors.
Treasury Secretary Steven Mnuchin had previously sought to leverage the loan, attached to an early round of coronavirus relief spending, in exchange for sweeping operational control of the Postal Service, including provisions that allowed the Trump administration to approve senior postal personnel decisions, service contracts with third-party shippers, collective bargaining negotiation strategies and high package prices.
The requests turned the USPS – typically an independent agency – into a political football as the possibility of an election in November conducted largely through the mail grew more likely.
Treasury, even before agreeing to the loan, achieved most of its desired terms. The Postal Service’s governing board in June installed a new postmaster general, Louis DeJoy, who was a major Trump booster and GOP fundraiser. The Postal Service also sought an outside firm to evaluate its largest service contracts, with the aim, expert say, of justifying a package-rate increase.
Postal advocates on Wednesday said they worried the terms requiring the Postal Service to disclose the contents of the service agreements would open the door to high parcel rates.
“I’m a little surprised that condition is even necessary,” said former Army secretary John McHugh, chairman of the Package Coalition advocacy group. “The USPS itself has already hired outside consultants to look at these matters to determine if they’re profitable and fairly priced. If nothing else, if gives Treasury entree to what up to this point has been absolutely proprietary information between only the USPS and its customer. One could argue this just another step to making the treasury secretary the de facto postmaster general.”
Democrats had publicly urged postal leaders to hold out and not accept funding from Treasury in exchange for relinquishing control of the agency. Democrats and Republicans in the Senate reached a bipartisan agreement in an early round of coronavirus relief spending to provide a $13 billion grant to the USPS, but Trump threatened to veto the entire bill – worth $2 trillion, and chock full of funding for unemployed workers, small businesses and other industries ravaged by the novel coronavirus pandemic-related recession – if the postal appropriation was included.
Mnuchin instead told lawmakers the mail service could receive a loan with terms attached, or get nothing at all. Desperate to save the agency that was at the time predicted to run out of money by October, lawmakers accepted the loan provision.
House Democrats included no-strings-attached borrowing provisions to their Phase Four coronavirus relief bill. Sen. Susan Collins, R-Maine, has pushed a proposal in the GOP-controlled Senate that would require Treasury to provide the $10 billion loan without conditions and supply an additional $25 billion emergency appropriation that would expire in September 2022. Postal leaders would be required to certify that the funds were needed to cover pandemic-related expenses.
The proposal has the backing of Senate Democrats and gained some Republican support, but not enough to pass a 60-vote threshold to avoid a filibuster.
Democrats were buoyed in recent weeks when the Postal Service reported better-than-expected financial results in May and in the 12 weeks after postal officials’ dire early-pandemic cash assessment. Propped up by surging package volume – postal workers say incoming parcels at their distribution centers are eclipsing Christmastime levels – the USPS had $13.4 billion in cash on hand before accepting the loan.
That is enough money, experts said, to tide the agency over to May 2021 as a worst-case scenario, or October 2021, if package volumes remain high. The loan from Treasury will buy the Postal Service at least five more months of liquidity, but perhaps up to a year’s more cash if package revenue continues to make up for declines in first-class mail, the agency’s most profitable product.
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