Open letter to Richard Cordray:

Congratulations on your appointment as the Director of the Consumer Financial Protection Bureau (CFPB). As a member of Financial Services Industry, I applaud your appointment.

I hope you consider 3 tests for what to focus on with consumer financial transactions.

Those areas that allow…

1) riskless concentrations of wealth are

2) structurally reinforced through law or policy that was

3) achieved through political influence (aka lobbying)

In short this means following the money back to the motivation and down through to the impact on consumers. Not an easy challenge in the post Citizens’ United World.

You have a LOT of boundaries, requiring watered-down “consensus” among other regulatory agencies. And I am aware there will be lawsuits charging you were illegitimately appointed (without Congress being formally out of session). I hope you vigorously exploit these attacks as public relations nightmares for your opposition “protecting those who seek to continue exploiting consumers.”

I hope you use 1) social 2) local and 3) national media to drive items into the light of public awareness. Two examples

The “digital soil” is well-prepared with the seeds of discontent. We need only a little accurate information about the shady practice to spread it virally into bad public relations for the company. And we all know bad PR is more effective than most perfectly written laws any day.

I hope you consider the example of Steroids in baseball. A little embarrassment goes a long way to modify the mass of human behavior. The baseball analogy is particularly helpful in that the players had no less greed than “Wall Street” to use nefarious means to achieve huge personal returns. And, like financial services, the more light is shown on a few bad actors, the more others will attempt to cover their tracks. They will make mistakes that will lead to easier identifications, more vigorous prosecutions and stronger civil and (hopefully) criminal penalties.

Finally, I hope you will consider studying Eliot Ness‘ use unique enforcement through existing regulations (tax codes) to gain ground more quickly. I hope you consider liberal use of the RICO Act whenever possible.

Anyway, lots to do and none of it easy, but I hope you and CFPB will succeed in improving consumers’ vital tools of transparency, understanding risk and competition to create the “invisible hand” in free markets envisioned by Adam Smith.

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