Kevin Drum Writes
"the bank's marketing budget — which no one in their right mind thinks should be shut down during a recession"
Guess I'm not in my right mind. I'd say it would be a good idea to impose a temporary regulation that no entity with a banking license is allowed to spend money on marketing. I will stipulate that banks have chosen profit maximizing marketing budgets. This does not mean that the Citibank marketing budget maximizes Bank of America profits. I'd guess that banks' marketing mainly serves to win clients from each other not to increase total demand for banking services.
Consider the ban on TV advertizing of cigarettes. This was followed by a huge increase in the profits of cigarette companies. They were no longer spending money to steal customers from each other.
Now, I don't want to ban marketing and adverstising in general. Hell no, then I'd have to pay to read Kevin Drum's blog. But banks need cash right now. I think it would be good if other sectors picked up the budget for free to the user content.
So I think a good way to prop up banks is to ban marketing by banks (also lobbying of course).
Just to make my proposal clear. I do not propose banning marketing only by troubled banks which have received public money. I think it would be a bad thing if banks with strong balance sheets were allowed to market and banks with weak balance sheets were not allowed to market. I propose a (temporary) regulation which applies to all banks. Oh except maybe for the temporary part.