Financial firms have found another way of making risk-free money.
In a New York Times story today, we learn that a burgeoning business is that of financial firms that lend money to attorneys representing clients suing in court. It used to be that law firms took the risk. If the suit failed, the law firm ate the costs. If it won, it took a huge chunk of the settlement. But now investors are lending money to law firms to pursue cases. This frees up the law firms from fronting the money. The firms, in turn, charge their clients interests on the loans. The interest rate on these loans are on par with those charged by credit card companies.
But if the suit fails, the investors are still due their loan, forcing some firms into bankruptcy if they can’t pay it.
So it’s literally, if you win, we win and if you lose, we win, lending money at exorbitant rates.