Administration plans to take advantage of emergency coronavirus loan to force changes to postal service

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The Treasury Department plans to take unprecedented control over key operations of the US postal service by imposing strict conditions on an emergency loan against the Congressional Coronavirus, which would fulfill President Donald Trump’s long-term goal of change the way the service works, according to two people familiar with the issue.

Officials working under Secretary of the Treasury Steven Mnuchin, who will consider the $ 10 billion loan, have told senior USPS officials in recent weeks that he could use the loan as leverage to give the administration an influence on the amount of agency fees for the delivery of packages and how it manages its finances, according to the two people, who spoke on condition of anonymity because the talks are preliminary.

Trump has denounced for years what he sees as mismanagement of the postal service, which he says has been operated by e-commerce sites like Amazon, and has sought to change the amount of agency fees for delivery package. (Amazon founder and CEO Jeff Bezos owns the Washington Post.)

As part of the $ 2 trillion stimulus relief against coronaviruses last month, the Treasury has been authorized to lend $ 10 billion to the USPS, indicating that it may not be able to pay and continue postal service without interruption in September. Mnuchin rejected a bipartisan Senate proposal to bail out the postal service during negotiations on the legislation, a senior Trump administration official and a Congressional official told The Washington Post.

The borrowing conditions were only discussed among the heads of the two agencies and were not made public because the postal services did not officially request the loan, said two people familiar with the matter. Mnuchin may still decide not to apply strict conditions to the approach of the September deadline. Postal services would not have to use the entire $ 10 billion loan at a time, but could borrow up to that amount at any time.

In discussions with senior USPS executives, Treasury officials said they wanted to raise rates on the lucrative parcel business of postal service, its only area of ​​profitability in recent years. The Treasury could also review all major postal contracts with parcel companies to push for higher margins on deliveries.

Treasury officials have said they could pressure the agency to demand tougher concessions from its powerful postal unions – among public sector unions that still retain significant leverage in negotiations with the government.

Officials also said Mnuchin wanted the authority to review senior agency hiring decisions, including the selection of the next postmaster, a decision that has so far been left to the board of governors of the postal service, composed of five members.

USPS spokesperson David Partenheimer confirmed in an email that the agency and the Treasury have started “preliminary discussions” on the loan, but that the Treasury has not yet requested “any impose none of these conditions on this borrowing authority ”. He declined to say whether these or other terms were under discussion.

A spokesperson for the Treasury said the ministry had started preliminary discussions on the terms of the loan, but said it was too early to comment on these conversations.

Amazon did not respond to requests for comment.

The postal service has repeatedly used a $ 15 billion open line of credit authorized by Congress almost 30 years ago as the agency’s finances have been squeezed by the disappearance of mainstream post and the rise pension costs. This loan has low terms and interest rates. The USPS has repaid the debt in recent years, but has never fully repaid the loan. On April 1, the Postal Service borrowed an additional $ 3 billion to help cope with the pandemic, bringing the agency to $ 14.4 billion on this line of credit.

Usually, the agency’s business decisions are made by its governors, who are appointed by the president, and an independent entity called the Postal Regulatory Commission, which ensures that the postal service charges rates for its services that cover its costs.

If Mnuchin were to gain more control with the new loan, a series of postal service management decisions, including the terms of major contracts and the collective bargaining strategy, could require Treasury approval. The hiring and firing of senior executives may be required to be managed by the Treasury, the two people familiar with the matter said.

Trump has targeted the postal service since the start of his tenure, initially urging the agency to double the rates it charges Amazon and other companies for delivery.

The agency has been devastated by the decline of first-class mail in recent decades, but one positive has been the delivery of packages. The postal service vigorously competes with UPS, FedEx and Amazon’s own delivery services, and specializes in delivering the “last mile” to a customer’s home.

Trump frequently repeats the claim that higher parcel rates on Internet carriers – Amazon in particular – could alleviate the financial problems of the postal service. The postal service has repeatedly defended its deal with the e-commerce giant, saying it gets fair rates for the services it provides in a highly competitive environment.

Higher prices for postal services could hurt the USPS by artificially raising its prices above those of UPS and FedEx, analysts said. It would also affect Amazon because the company contracts for “last mile” deliveries more frequently than its competitors.

In an email, UPS spokesperson Kara Gerhardt Ross called the postal service “an important partner for us in delivering to communities”, especially during the pandemic.

“At the same time, the USPS would benefit from modernizing its two cost allocation methods to reflect the growth of the last decade in the competitive package market,” she said.

FedEx did not respond to a request for comment.

The familiar mail carriers in the iconic USPS blue and white trucks continued to deliver mail and packages to a quarantined country. The postal service remains an essential information channel for the decreasing proportion of the population that is not online.

A postal service spokesperson said that 1,219 of the 630,000 postal workers tested positive for the coronavirus. According to the American Postal Workers Union, 44 workers have died, one of several union groups representing USPS workers.

The postal service is forecasting a $ 13 billion deficit this year due to the pandemic, with mail volumes down about 30% since the virus forced companies to cut ads, catalogs and other mail. A jump in parcel deliveries to home customers did not fully compensate for these losses.

Postmaster General Megan Brennan asked lawmakers this month for an $ 89 billion bailout that would include funding to compensate for pandemic losses, new modernization funds and $ 39 billion. restructured debt.

The plight of the postal service recently caught the eye of lawmakers on both sides. Senator Bill Cassidy, R-La., Told donors on a call last week that he would like postal unions to give wages and benefits concessions to help finance the postal service. Senate Minority Leader Chuck Schumer, D-N.Y., Said Tuesday that the relief for the postal service should be part of a “Phase IV” stimulus package.

At a meeting of the Oval Office over a year ago, Trump denounced to assistants what he saw as the postal service dysfunction and reiterated long-standing grievances about the costly effect on American taxpayers , according to a former senior government official present at the meeting. .

Trump has repeatedly called for changes to the agency’s financial structure. Mnuchin has tackled the cause and has since been repeatedly informed of potential solutions, the former official said.

“The people around [Mnuchin] I thought it was crazy because people have been trying to understand this for years, and it is very difficult politically, “said the former official.

But the Secretary of the Treasury has so far found career postal staff who have resisted his change efforts. Mnuchin created a task force that released a 74-page study in 2018 that called for some of the same changes that the Treasury could ask for now, namely cutting labor costs, restructuring service agreements third and the increase in flat rates.

“Demand price increases, lower service costs or leave the business for any mail product that is not considered an essential service and does not cover their direct costs,” the report recommends.

But the recommendations did not go anywhere, in part because the agency did not have a quorum on the Board of Governors. He also faced political opposition in Congress and among the union ranks to cut postal routes and other services.

Last fall, Mnuchin sent his deputies to present a new board of directors largely made up of Trump appointees with a list of changes that tied conditions to the rest of the usual $ 15 billion line of credit. postal service, breaking with a generous precedent of nearly five decades of postal borrowing conditions.

But quarry workers backed away from the conditions, and USPS management quickly rejected them.

“The Treasury will want to see some of these recommendations implemented,” said Paul Steidler, postal expert at the Lexington Institute, a conservative think tank focused on security issues.

Democrats say Mnuchin will make a mistake if he tries to impose strict conditions on the new loan.

“If Mnuchin wants to play this kind of game with the postal service, I think it is time for the postal service to tell him that he will not accept unacceptable conditions, and that means that Mnuchin will have the disruption in his hands service this fall, “said Representative Gerald Connolly, D-Va., who chairs the House subcommittee responsible for postal monitoring. “I think it is time to stare at him and bring down the White House, and for Congress to decide, we will stick to the postal service as we know it.

“It is an essential service and should be treated as such. I hope the Post Office will stare at him. Otherwise, this amounts to entrusting the daily management to the Treasury Department. “

Connolly and Representative Carolyn Maloney, D-N.Y., Joined Sens Gary Peters, D-Mich. And Thomas Carper, D-Del., In a letter dated April 3 to Mnuchin asserting Congress’s supervisory authority for the postal service.

“We strongly urge you to make this loan to the postal service in a timely manner, on fair terms and in accordance with the spirit of the care law,” the letter said. “We expect the Department of the Treasury to fully comply with federal laws and to refrain from setting conditions that would undermine the statutory powers of the postal service. “

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Washington Post editors Josh Dawsey and Jeff Stein contributed to this report.

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