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October 11, 2010
The States vs. Wall St. By MICHAEL
POWELL<http://topics.nytimes.com/top/reference/timestopics/people/p/michael_powell/index.html?inline=nyt-per>

COLUMBUS, Ohio — Back East, at the corner of Broad and Wall Streets, the
view is swell. The Dow is soaring, and bankers look pleased.

But here on East Broad Street, the mood is gloomier. At least 90,000
residential and commercial foreclosure notices will be filed in Ohio this
year. Pension funds for teachers, secretaries and janitors have suffered
grave losses. And multitudes of the unemployed in Ohio now speak of turning
to prayer.

Ohio’s attorney general, Richard Cordray, might be seen as their pinstriped
avenger.

“There’s a belief here that Wall Street is a fixed casino and it’s back in
business, and we’re left holding the bag,” said Mr. Cordray, whose office
overlooks East Broad. “It’s important for us to show we’ll go after a
company that does wrong.”

Mr. Cordray in two years in office has demonstrated a willingness to sue
early and often, filing lawsuits against global financial houses, rating
agencies, subprime lenders and foreclosure scammers. He has wrested about $2
billion so far, a string of gilded pelts: a $475 million Merrill
Lynch<http://topics.nytimes.com/top/news/business/companies/merrill_lynch_and_company/index.html?inline=nyt-org>settlement,
$400 million from Marsh
& McLennan<http://topics.nytimes.com/top/news/business/companies/marsh_and_mclennan_companies/index.html?inline=nyt-org>and
$725 million from the American
International Group<http://topics.nytimes.com/top/news/business/companies/american_international_group/index.html?inline=nyt-org>.


Last week, he filed suit against
GMAC<http://topics.nytimes.com/top/news/business/companies/gmac-llc/index.html?inline=nyt-org>Mortgage,
accusing the loan servicer of filing fraudulent affidavits in
hundreds of Ohio foreclosures.

His office has returned money to investors, pension funds, schools and
cities. And he has directed millions to agencies fighting foreclosure.

“We see what Washington doesn’t: the houses lying vacant, the eyesore
stripped for copper piping with mattresses out back,” Mr. Cordray says. “We
bailed out irresponsible banks, but we forgot about everyone else.”

It speaks to this political age that such words are more rarely heard from
federal regulators, who walk quietly and carry big bailout checks. Instead
state attorneys general, in this case, a sandy-haired 51-year-old Democrat
who sits about 400 miles from Washington, are giving full throat to popular
outrage.

If Eliot Spitzer<http://topics.nytimes.com/top/reference/timestopics/people/s/eliot_l_spitzer/index.html?inline=nyt-per>,
the former New York attorney general, was the prototype of this breed, a
handful of current ones, like Mr. Cordray, Martha
Coakley<http://topics.nytimes.com/top/reference/timestopics/people/c/martha_m_coakley/index.html?inline=nyt-per>of
Massachusetts, Lisa
Madigan<http://topics.nytimes.com/top/reference/timestopics/people/m/lisa_madigan/index.html?inline=nyt-per>of
Illinois, Tom Miller of Iowa and Roy Cooper of North Carolina, lay
claim
to his mantle. Like recessionary scouts, they spot trouble, like a rapacious
foreclosure-rescue operator, a predatory credit card company or a financial
firm draining a pension fund.

Ms. Coakley secured millions of dollars in mortgage modifications from
Countrywide
Financial<http://topics.nytimes.com/top/news/business/companies/countrywide_financial_corporation/index.html?inline=nyt-org>and
reached a $102 million settlement with Morgan
Stanley<http://topics.nytimes.com/top/news/business/companies/morgan_stanley/index.html?inline=nyt-org>over
its role in financing the subprime loans that fed the housing crash in
Massachusetts.

“We were the first to go after predatory loans — we’re not waiting for
federal agencies to act,” Ms. Coakley said.

Some express skepticism, suggesting that such lawsuits are emotionally
pleasing but economically destructive. Former Senator Michael DeWine, a
Republican who is running against Mr. Cordray, a Democrat, in the November
election, has implied that Mr. Cordray wields an antibusiness cudgel. Better
to rely on federal regulators, others argue, to constrain global
corporations.

That strikes James E. Tierney, director of the National State Attorneys
General Program at Columbia, as a bit beside the point.

“Is state action as effective as a federal regulator going after these
companies? Absolutely not,” says Mr. Tierney, a former state attorney
general for Maine. “But when regulators are too worried about giving
offense, there’s no reason an enterprising attorney general can’t go in
there,”

Born in Grove City, Ohio, Mr. Cordray was educated at Michigan State, Oxford
and the University of
Chicago<http://topics.nytimes.com/top/reference/timestopics/organizations/u/university_of_chicago/index.html?inline=nyt-org>Law
School. A Supreme
Court<http://topics.nytimes.com/top/reference/timestopics/organizations/s/supreme_court/index.html?inline=nyt-org>clerk,
he also argued cases before the court. In 1987, he enjoyed a run as a
five-time winner on the television show “Jeopardy!”

Somewhere along the way, he hankered for more. His father ran a program for
mentally disabled people; his mother, a social worker, founded an
organization of foster grandparents; and he wanted to enter the public
sphere. Mr. Cordray began running for office.

His yearning often went unrequited; voters, he noted with a hike of the
eyebrows, elected him state representative but rejected his run for Congress
and an early attempt at state attorney general.

He shrugs.

“I really got my head pounded in over the years in politics,” Mr. Cordray
says. “My wife thought I was nuts.”

Eventually, he downsized his ambitions and ran successfully for Franklin
County treasurer. And in 2008, he won a special election for attorney
general.

Mr. Cordray is no William Jennings Bryan inveighing against the evils of
monopoly capital. He can be eloquent about corporate misbehavior, in an
eyes-downcast and soft-spoken fashion. (His language reads hotter on the
page than it sounds in person.)

He is, however, tapping a populist tradition in Ohio. This is where
politicians mounted challenges to the Standard Oil monopoly of John
Rockefeller and where Senator John Sherman led a late 19th-century campaign
to pass the Sherman Antitrust Act, which was the first law to require the
federal government to investigate companies suspected of running cartels and
monopolies.

Mr. Cordray carefully describes his allegiance to capitalism, although he
says the financial
crisis<http://topics.nytimes.com/top/reference/timestopics/subjects/c/credit_crisis/index.html?inline=nyt-classifier>should
explode forever the efficient-markets theory, popular with
economists, that the best market is a self-correcting one. (Adam Smith’s
“Wealth of Nations” shares space on his office bookshelf with books by the
urbane Keynesian John Kenneth
Galbraith<http://topics.nytimes.com/top/reference/timestopics/people/g/john_kenneth_galbraith/index.html?inline=nyt-per>.)


“The notion that banks will just get things right over time is perhaps
true,” Mr. Cordray says. “But over what time period, and at what terrible
cost to the individual American?”

Certainly, he has not minced words in pursuing a steady stream of cases
against corporations.

He accused Marsh & McLennan of conspiring to eliminate competition in the
insurance business by generating fictitious quotes. He denounced three
credit rating firms, Fitch
Ratings<http://topics.nytimes.com/top/news/business/companies/fitch_ratings_inc/index.html?inline=nyt-org>,
Moody’s<http://topics.nytimes.com/top/news/business/companies/moodys_corporation/index.html?inline=nyt-org>Investor
Services and Standard
& Poor’s<http://topics.nytimes.com/top/news/business/companies/standard_and_poors/index.html?inline=nyt-org>,
for giving inflated ratings to packages of troubled mortgages put together
by the big investment houses. He says that Ohio pension funds lost close to
half a billion dollars by investing in those triple-A rated securities.

And last October, he accused Bank of
America<http://topics.nytimes.com/top/news/business/companies/bank_of_america_corporation/index.html?inline=nyt-org>officials
of concealing critical facts in the acquisition of Merrill Lynch,
even as that firm careened toward insolvency. Top bankers, he said, had not
come remotely clean about the extent of the losses at Merrill and its
bonuses.

The lawsuit against Bank of America was the first of its kind, although Mr.
Cordray’s actions drew rather less press than a lawsuit filed months later
by Attorney General Andrew M.
Cuomo<http://topics.nytimes.com/top/reference/timestopics/people/c/andrew_m_cuomo/index.html?inline=nyt-per>of
New York. Mr. Cuomo, whose skill with the tactical leak, news release
and
the lawsuit is considerable, tends not to work closely with his fellow state
attorneys general, say two officials from states other than Ohio.

Attorneys general are perhaps more successful at extracting large sums of
money than in changing corporate behavior. A Goldman
Sachs<http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html?inline=nyt-org>or
Marsh & McLennan, to this view, tends to see such settlements as a
cost
of doing business.

“The settlements are large, but the changes in behavior don’t seem to be
that large,” said Daniel C. Richman, a former federal prosecutor and
professor at Columbia Law School. “These targets have massive amounts of
money to pay off and continue on their merry way.”

Raise this criticism to Mr. Cordray and he nods in agreement.

“In an ideal world, if the S.E.C. had done its job, that would be much
better,” he said. “Our settlements make up for the losses fractionally.”

As it happens, Mr. Cordray now faces a more existential threat. Legal
challenges to corporate misbehavior are not proven electoral gold. This
year, Ms. Coakley, a Democrat, fell to Republican Scott
Brown<http://topics.nytimes.com/top/reference/timestopics/people/b/scott_p_brown/index.html?inline=nyt-per>in
a race to fill the Senate seat of Edward
M. Kennedy<http://topics.nytimes.com/top/reference/timestopics/people/k/edward_m_kennedy/index.html?inline=nyt-per>.


And polls show Mr. Cordray running behind in his race with Mr. DeWine. He’s
no natural glad-hander — he apologizes when he realizes he has automatically
extended his hand at a luncheon. More paradoxical, he finds himself at risk
of being identified with “them,” which is to say the establishment that Ohio
residents view as having failed them.

Again, he shrugs. He is not inclined to blame voters for his troubles.

“Politicians are kind of like adolescents, always looking in the mirror and
assuming that’s what people see,” he says. “But there’s a great anxiety out
there, a great unease about our future. Most people are hurting, and they
don’t have the time to pay attention to us.=9