Congressional Republicans have been doing their best to undermine the Dodd-Frank financial reform law. They’ve tried to gut the budgets of the regulators charged with implementing the law, push back the date for when certain provisions take effect, and obstructed nominees for key regulatory positions. And legislation examined by House Republicans on Friday, if enacted into law, would be one more volley in this assault.

As HousingWire explained, a bill sponsored Rep. Bill Posey (R-FL) would permit banks to assume that modified mortgage loans held on their books have no risk whatsoever. This would allow them to lower the capital — or amount of cash — they need to keep on hand for when loans turn sour:

The House Financial Services Committee heard testimony from lenders and regulators Friday on a proposed bill that would allow banks to count recently modified mortgages as accrual loans on their balance sheets — meaning the loan can be counted on to be repaid.

The emerging concern is twofold, however, where modified mortgages could be counted as an asset and not a liability. This may create a false assumption of capital requirements, especially for lenders with large amounts of modified mortgages on the books.

“Subjective overregulation makes banks less inclined to loan money for job creation, results in more foreclosures, more layoffs and longer unemployment lines,” Posey said.

But at the moment, the Federal Deposit Insurance Corp. already allows banks to count modified loans as performing, meaning that they can assume there will be payments coming in from them. While mortgage modifications are going to be very important to the economic recovery, this bill would allow banks to treat a modified loan as having no risk, even when the banks are well aware that a borrower is in trouble. The banks would then be able to lower the amount of capital they keep on hand, chipping away at the foundation of the financial system.

George French, an FDIC deputy director, said the bill “‘would result in an understatement of problem loans‘ on banks’ balance sheets, [and] overstate the amount of capital they hold against losses.’” MIT Professor Simon Johnson added, “In some ways, the bill duplicates what the FDIC already does. But classifying loans as ‘accrual’ when they are either not receiving the full interest due or when the institution knows there will be a problem is not a good idea.”

During the 2008 financial crisis, it became abundantly clear that America’s largest banks did not have sufficient capital on hand to weather the storm created by the housing crisis. So many loans went into default when the housing bubble burst that the banks were on the verge of collapse. As a result, both Dodd-Frank and new international accords stipulate higher capital requirements for banks. This bill proposed by the GOP would undermine that effort.

The key sticking point in the contentious debt ceiling negotiations has been the unwillingness of Republicans to make a single concession while they make huge demands of Democrats.

In a press conference today, President Obama explained that the two sides have reached an impasse because Republicans have taken a “my way or the highway” posture. Obama said he’s “bent over backward” to work with Republicans, offering cuts that have forced him to “take on significant heat from my party.” “I don’t see a path to a deal if they don’t budge,” he concluded.

Republican leaders responded by saying they have already sacrificed something: they’ve agreed to raise the debt ceiling. At a news conference with reporters today, House Majority Leader Eric Cantor (R-VA) said the key Republican concession is “the fact that we are voting — the fact that we are even discussing voting for a debt ceiling increase.” Cantor then insisted Democrats are “going to have to come meet us” if they want a deal before Aug. 2 — as if Democrats are the ones who won’t meet Republicans halfway.

Before heading to the White House for another round of debt talks, Speaker John Boehner (R-OH) agreed that this is what he considers a “balanced” agreement: “Most Americans would say that a balanced approach is a simple one: the administration gets its debt limit increase, and the American people get their spending cuts.” In fact, a recent Pew poll found that 60 percent of Americans — and 50 percent of Republicans — say it is more important to keep Social Security and Medicare benefits as they are than to reduce the deficit.

Boehner and Cantor’s justification is extraordinary since GOP leaders have conceded that raising the debt ceiling is an economic imperative. At the same press conference today, Boehner said, “I agree with the President we can not allow our nation to default on our debt.” Just days ago, he said that failing to raise the limit by Aug. 2 “puts our economy in jeopardy, risking even more jobs.” Just yesterday, Senate Minority Leader Mitch McConnell (R-KY) claimed “no one is talking about not raising the debt ceiling.”

So how can it be both an imperative and a gift that Republicans deign to give?

During the Bush presidency, Republicans voted to increase the debt limit 19 times without ever demanding cuts in exchange for their votes. But this time, Republicans have dug in their heels and made it clear that not ruining the global economy is the very most they’re willing to do to reduce America’s deficit — and even that comes at a heavy price.