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Bank Watchdog a Paper Tiger

NEW YORK ( TheStreet) -The Consumer Financial Protection Bureau and new Director Richard Cordray have the financial services industry running scared, though it's difficult to see why.

American Express (AXP - Get Report) vice chairman Ed Gilligan sure made the new consumer cop sound threatening when he spoke at an industry conference hosted by Citigroup earlier this month.

Richard Cordray, Director, Consumer Financial Protection Bureau

"The Consumer Protection Bureau is a new regulator that comes in with broad powers that cuts across everyone who's operating in the consumer business in financial services and probably beyond that as well. So it introduces a lot of change, and no one quite understands yet how that will come in and how things transition from existing regulators to the CFPB," Gilligan said.

In a note following the conference, Citigroup analysts referred to the regulator as "a risk for investors to keep an eye on and one we are getting more nervous on."

And in case that's not scary enough, there's this--again from the Citigroup report: "our regulatory contacts believe at a minimum it could be a back door vehicle for things like studies."

Studies? Boy, it's a good thing JPMorgan Chase (JPM) chief Jamie Dimon trained as a boxer so he can defend himself.

Certainly Cordray has demonstrated he will take on the banking industry. As Ohio Attorney General, for example, he sued Bank of America (BAC - Get Report)in 2009, arguing the bank hid losses at Merrill Lynch to get shareholders to sign off on Bank of America's acquisition of Merrill. The lawsuit has yet to be resolved.

His appointment to lead the bureau was mired in controversy, with President Obama eventually bypassing Congress after Republicans held up the nomination on the grounds that the structure of the bureau gave the director too much power.

Some attorneys believe the opposition to Cordray's appointment will continue.

"It's certainly an issue that I'm sure somebody else is going to challenge," said Indiana Attorney General Greg Zoeller, who nonetheless indicated he himself had no plans to do so, as he is currently occupied with other matters, including a 26-state challenge to the president's health care law.

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