Martin O'Malley's Wall Street White Paper Is Commendably Naive


Beyond being a common answer to the question "who?" Martin O'Malley has remained largely undefined so far in his quest to disrupt Hillary Clinton's juggernaut path to the Democratic nomination. He tried to change that yesterday with an adorable little white paper about what would be different on Wall Street under President O'Malley.

Tacking to the left and attacking Hillary for her close relationship with the banks is bearing fruit for Bernie Sanders, whose poll numbers are soaring. But Bernie is also increasingly coming off like your crazy neighbor who blames Wall Street for all his problems, giving O'Malley a real opportunity to make a name for himself as the realistic Democratic regulatory reformer.

All in all, O'Malley's white paper is a very clear signal that the former mayor and governor sees that opportunity and is studying up on financial regulation in order to seem more presidential. But the conclusions reached in the paper reveal an almost charming naiveté about how things actually work in the dark shadows between K Street and Wall Street. O'Malley makes some very nice arguments, like making the president of the New York Fed and the Fed's general counsel presidential appointees. Admittedly, the proposals put a lot of faith in the idea that the president's choice will not be influenced by Wall Street pressure, but the policy is sound and it shows that O'Malley is taking the risk of getting wonky wit' it.

Other things look less wonky and more baldly appealing to the far left of his own political base.

Take for example O'Malley's aim to stall the spin of the "revolving door" by banning anyone who has served in regulatory position to work for any Wall Street firm that they regulated for three years. In theory, that seems like a great way to prevent regulators from cashing in on their experience by helping banks subvert the very rules they were trusted to enforce, but it will also ensure that the pool of people looking to work for regulatory agencies will suffer a very serious talent shortage.

Three year waiting periods are punitive for people that would like to make up for their government service salaries by taking a well-paying job in the private sector. And any argument that they can take a job at a bank they never regulated is Pollyanna-esque at best.

In an era where Barney Frank is taking a position on the board of a bank after leaving Congress as the chief critic of banks, the revolving door has become a basic underpinning of how things get done. Without the semi-porous wall between Wall Street and Capitol Hill that rewards the people who slipping back-and-forth through it, we could very easily face a situation wherein the vast majority of people working at the SEC and CFTC are anti-Wall Street zealots looking to punish a sector that they don't even truly understand.

And a strong staff at SEC and CFTC would be necessary for President O'Malley since he's also proposing to double the budgets at those agencies, create a unit at Justice to work with them on financial crimes (like the most boring "CSI" spinoff ever) and charge them with a very strict enforcement of the hypothetically reinstated Glass-Steagall Act.

That's a lot of government. The idea of regulatory agencies hulking out as the White House orders them to break up the "Too Big To Fails" is the kind of imagery that makes Elizabeth Warren flush with desire, but its also the kind of stuff that makes centrists start asking how we're going to pay for it and whether or not its an unnecessary restriction of the private sector.

O'Malley's paper also reveals that he is trying to be more like Bernie in the streets but a Hillary in the sheets. One of his proposals is to limit high-frequency trading by implementing a financial transaction tax, but like not in a mean way. According to the language of the proposal "The tax will be well-designed not to soak financial traders, but to fix bad incentives for speculation that comes at the cost of real job-creating investment."

But a new tax meant to curb behavior is inherently designed to "soak" the people engaging in that behavior. No one is saying that we shouldn't be taking a look at high-frequency trading, but that is too fine a line to be walking without being fatuous.

Frankly, O'Malley's economic ideas are strongest when he is fully and forcefully behind them. While its not in the paper, O'Malley has come out swinging on a plan to ensure that within five-years of taking office, students across the country will graduate debt-free from public colleges and universities thanks to sweeping implementations of mandated refinancing options.

It can be inferred that much of that plan stems from O'Malley's experience with his own kids. According to the Washington Post:

O’Malley and his wife, a district court judge in Baltimore, have taken out nine loans totaling $339,200 to help pay for the education of their oldest two children. The interest rates range from just over 6 percent to 8.5 percent, an aide said.

O'Malley's wonk muscles are stretched and that's great because making a strong argument is the only real way to steal focus from Hillary this cycle. Maybe Martin O'Malley would be better served by focusing on a topic like student debt rather than trying to a slow a revolving door whose utility he doesn't seem to fully grasp.



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