In his latest op-ed, Paul Krugman hearkens back to the happy days of banking. When it was a simple job of attracting deposits, lending that money out and that was that. He even invokes the old thing about banks giving out free toasters for opening an account -- presumably to show that those were happier times.

But Eddie Elfenbein points out that the toasters weren't just a happy relic of the "good ol' days"

Banking has changed dramatically over the last 30 years. But that Golden Age wasn’t so golden. The reason banks offered toasters to new accounts wasn’t due to bad marketing, but due to outdated regulations. That’s the only way they could pass cost savings on to depositors.

Free toasters from banks weren’t some happy relic of a bygone era, they were the one of reasons why the modern financial world came about. Interest rates were regulated and you couldn’t even pay interest on a checking account. Also, bank locations were far less convenient to today’s world with ubiquitous ATMs.

A good comparison is the good old days of the airlines. There was a time when flights all had good meals and attractive stewardesses wearing cute dresses. But that was during the days of regulation, when airlines couldn't compete on price or anything else. So they had to compete heavily on these other perks.

Of course, airlines were probably more steadily profitable back then, as compared to now when they're notoriously money losing, so some have argued that we should go back to $700 tickets, limited routes and profitable airlines with meals.

Some have argued that this is what we need in banking. Nassim Taleb, for one, has argued that banks should just be like utilities -- simple, regulated and boring. That's fine, but utilities all have local monopolies and with little incentive to serve customers. So there'd be one or maybe two NYC retail banks, with little incentive to overlap geographically or do much of anything to improve the customer experience. That's what banks-as-utilities means, and perhaps that's what Krugman would like to see.

Along these lines, John Hempton argued today that the solution is for there to be fewer banks -- contrary to the argument that we need new banks -- with a cozy, profitable oligopoly, with little built-in incentive for crazy risk taking. As he puts it, banks would essentially be allowed to "rip us off", enjoying fat margins at the government's blessing. How many folks will go for that?