As I pointed out earlier, Republicans are planning to offer an amendment to Sen. Chris Dodd’s (D-CT) financial regulatory reform bill that would forbid a new consumer protection regulator from enforcing its rules for any institution that is not a “large non-bank mortgage originator,” leaving most of the financial system outside of the regulator’s reach. This fits with the broader GOP theme on consumer protection, which is to say that, if it gets boosted at all as a result of regulatory reform, it should remain a second-order issue, after the profitability of banks.

But that doesn’t stop Republicans from complaining about consumer protection measures that they claim are missing from Dodd’s bill. For instance, Sen. Saxby Chambliss (R-GA) took to the Senate floor today to criticize Dodd for not including standards for mortgages in his bill, but still taking a swipe at the consumer protection portion of Dodd’s legislation in the process:

There are no mortgage standards that are specifically set forth in the underlying bill…Certainly, we need standards in place, to ensure that people who are buying houses can afford to make the mortgage payments that they are making application for. And with respect to the consumer financial protection act, it appears that in the underlying bill there is an umbrella that is cast out there that is going to require the inclusion of more non-problem areas of the consumer finance industry.

Watch it:

For months, Republicans derided the Democrat’s attempt to create a new consumer protection regulator, saying that it would decree what financial products (including mortgages) people could have. The cacophony was so loud that a provision in the House of Representative’s financial reform bill mandating that banks offer consumers a plain “vanilla” product — a standardized version of whatever the consumer is looking for — before moving onto more complicated products was dropped.

But now Chambliss is advocating that Congress come up with a plain vanilla mortgage. This could be a good idea! But why is the GOP so intent on focusing solely on mortgages, when there were consumer abuses across the financial sector? Banks and non-banks alike are able to rip off consumers with a host of financial products, making a regulator with the ability to write and enforce regulations against all of them a critical addition to the regulatory system.

The GOP is flailing on consumer protection because it doesn’t want to do anything that will cut into the ability of banks to make a profit on confusing, obfuscatory financial products. But it also can’t deny that many people were hurt by the bank’s use of products that should have never been sold. So they’re left trying to call for prudential standards in one slice of the system, while leaving the rest of the system in the dark and unregulated, allowing the banks to run rampant.

Yesterday, the Senate was supposed to start voting on amendments to Sen. Chris Dodd’s (D-CT) financial reform bill, but the show was held up as Dodd and Sen. Richard Shelby (R-AL) worked out their differences on the $50 billion resolution authority fund that Dodd favored, but that Republicans have focused a hefty amount of (unjustified) criticism upon.

Dodd ended up dropping the fund, and since their talking point about “permanent bailouts” has been rendered moot by the deal, Republicans are going to have to find something else on which to focus their efforts. To that end, Shelby, with the backing of Minority Leader Mitch McConnell (R-KY), has been working on a consumer protection amendment that the GOP will offer as a substitute to Dodd’s proposal creating a Bureau of Consumer Financial Protection within the Federal Reserve.

The Wonk Room has obtained both the legislative language and a one-page primer that Republicans have put together on the amendment. The proposal involves creating a new consumer protection division within the Federal Deposit Insurance Corp., with an independently appointed director. But the real problem with the proposal is who the new division would have authority over:

The Division will have primary supervision and enforcement authority over large non-bank mortgage originators, and other financial services providers who have violated the consumer protection statutes. Primary supervision and enforcement for our nations’ banks, thrifts and credit unions will remain with their primary prudential regulator.

Politically, the Republicans are making a smart move in suggesting that the consumer protection division be housed in the FDIC, since it has a well-deserved reputation for watching out for consumers, as opposed to the Fed, which has a well-deserved reputation for ignoring consumer protection entirely.

But by limiting the division’s enforcement power to “large non-bank mortgage originators,” the GOP exempts nearly the entire financial system. Under this plan, the division can’t take any enforcement action against commercial banks, investment banks, credit card companies, car dealers, payday lenders, and non-banks that sell financial products other than mortgages (such as AIG). It can’t take any action against the worst actors in terms of firing up the subprime machine, like Washington Mutual or Countrywide.

In fact, Section 1024 of the legislation makes it abundantly clear that the division would be powerless to do anything to rein in an actual bank that was using predatory financial products. I’m actually hard pressed to think of a single financial company that fits the definition the GOP has set out, as all the large non-bank mortgage originators went bust when the subprime bubble burst. Instead, the traditional bank regulators will be relied upon for enforcement, despite their terrible track record.

At least the GOP has ceded that creating a consumer protection council, or some other coalition of bank regulators, would be worthless in terms of real consumer protection, and has chosen to support a new entity with an independently appointed director and its own budget. But this amendment is not a serious attempt to deal with the status quo in our financial system, which is that consumer protection takes a very obvious back seat to the ability of banks to earn heaps of money.