Krauss on Cordray and CFPB: Tort Lawyers' Dream
With former Ohio attorney general Richard Cordray confirmed as first head of the Consumer Financial Protection Bureau (CFPB), the plaintiff's bar might profit substantially from the social costs that could be generated by the CFPB, says Professor Michael Krauss.
In an article in American Thinker, Krauss comments that the identity of the chair is of paramount importance, given the structure of the CFPB, and points to contributions Cordray received, when running for the position of Ohio attorney general, from out-of-state law firms with no seeming interest in Ohio.
"We don't need a massive federal lawsuit instigator, headed by the lawsuit filers' BFF," Krauss maintains.
The CFPB "is insulated from all the traditional checks and balances of government agencies. Its budget, for example, is not dependent on appropriations -- it determines how much it needs, and it gets the money directly from the Federal Reserve. The CFPB has no dedicated Inspector General. It has no Commission or Board, and its Chairman is not subject to dismissal at will by the President," Krauss says.
Tort Lawyers' Dream, Economy's Scourge: Richard Cordray and the CFPB, American Thinker, October 18, 2011. By Michael I. Krauss.
"In brief, here's one of the problems that make it worthwhile for these law firms to make out-of-state campaign contributions. Every time a corporation is investigated for 'abusive' practices, its stock price will drop. Each significant stock price drop is then followed by a lawsuit on behalf of disgruntled shareholders, who allege that they have been cheated because the corporation's 'abusive' practices caused its share price to drop. Every such lawsuit of course truly does benefit the law firms that 'represent' the shareholders, though of course the suit cannot confer a net benefit on the shareholders (no suit can cause the corporation's price to rise back up again). And these law firms, who troll for shareholders to 'represent', 'pay to play' -- they funnel campaign contributions precisely to those politicians who will instigate the investigations that will cause share prices to drop. Richard Cordray was an intrinsic part of this cycle until he was defeated at the polls in 2010. Law firms have paid a lot to 'play' with him, and now he is in line to become the chairman of the most massive, lawsuit-instigating agency this country has ever seen."