On Monday, a regulatory body created by the Dodd-Frank reforms of 2010 named the first set of non-bank financial companies that will face the most stringent provisions of the Wall Street reform package. Since the so-called “shadow banking” sector was the epicenter of the complex and risky behavior that caused the financial crisis to spill over into the broader economy, the announcement constitutes significant progress for meaningful Wall Street reform. The news means that three major financial companies that do not take deposits – AIG, Prudential Financial, and GE Capital – will be unraveled by the government rather than bailed out should they go bankrupt in the future.

But the Financial Stability Oversight Council’s (FSOC) announcement was immediately mischaracterized as making bailouts more likely by Rep. Jeb Hensarling (TX), Chairman of the House Financial Services Committee. In a statement, Hensarling claimed that “hardworking taxpayers are at greater risk of being forced to fund yet another Wall Street bailout as their government officially designates more large companies as being ‘too big to fail’.”

Hensarling’s statement is premised on a misconception of the Dodd-Frank provision known as Orderly Liquidation Authority. That misconception is hardly limited to Hensarling. It was included in the GOP’s budget last year, and it dates back to industry-funded talking points drafted by Republican strategist Frank Luntz back when Dodd-Frank was being written.

The Orderly Liquidation Authority is the government’s tool to take over and unwind a failing financial company, rather than bailing it out. Federal Reserve Chairman Ben Bernanke has said such a policy could have forestalled the 2008 bailouts, and the Treasury Secretary who oversaw those bailouts agrees. Experts disagree about whether or not the system is sufficient to remedy the too-big-to-fail problem, with many arguing that further restrictions on the size and behavior of giant financial firms are necessary. But the GOP claim that Dodd-Frank enshrines bailouts and too-big-to-fail in law gets a complicated policy backwards.

Meanwhile, the announcement about AIG, Prudential, and GE Capital means that they will also be subject to stricter regulations than smaller, less systemically risky firms. “Systemically important financial institutions,” a list the three now find themselves on, will be subject to new Federal Reserve oversight and required to draft a “living will” to be used in dismantling them should they fail. Other specifics of the requirements they face have yet to be settled. They have 30 days to appeal the decision.

Less than a day after President Obama announced that he is re-nominating Richard Cordray to be director of the Consumer Financial Protection Bureau (CFPB), Republicans suggested that they again intend to obstruct his nomination based on their continued opposition to having a strong independent agency protecting consumers from predatory lending practices. Cordray’s recess appointment is set to expire at the end of 2013, unless the Senate confirms him.

Nearly every Senate Republican voted against the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which established the independent bureau. In 2011, 45 Republicans filibustered Cordray’s nomination, denying him an up-or-down vote, based on their objection to the agency itself. In a May 2011 letter, the Republican Senators made it clear that they would not allow a vote on any nominee unless the CFPB was first drastically restructured and weakened — though they did not attack the former Ohio Attorney General Cordray’s qualifications.

Though President Obama comfortably won re-election and Senate Democrats expanded their Senate majority to 55 seats in November, just 41 members of the Republican majority can again prevent Cordray from even getting a confirmation vote. It appears that might be a challenge, as:

• Sen. Mike Crapo (R-ID), who is likely to be the top Republican on the Committee on Banking, Housing and Urban Affairs, said in a statement: “Today’s decision to re-nominate Richard Cordray to be Director of the Consumer Financial Protection Bureau after using an unconstitutional recess appointment is premature, given the outstanding concerns about the bureau and the legal challenge to the recess appointment. Until key structural changes are made to the bureau to ensure accountability and transparency, I will continue my opposition to any nominee for director, as outlined in a letter signed by 45 Republican Senators to the president.”
• Sen. Richard Shelby (R-AL), the outgoing Ranking Member on the Committee on Banking, Housing and Urban Affairs, through a spokesman said he has “not changed his position” since 2011.
• Sen. Bob Corker (R-TN), a member of the Committee on Banking, Housing and Urban Affairs, said in a statement: “While I respect Richard Cordray as a substantive person who has shown thoughtfulness in writing regulation up to now, I still have reservations about the CFPB’s structure, namely the lack of a board to help ensure sound policy and accountability, and I look forward to discussing with him how to address those concerns.”
• Rep. Jeb Hensarling (R-TX), chairman of the House Committee on Financial Services, said in a statement: “The Dodd-Frank Act places vast, unprecedented and unchecked power completely in the hands of a single person. The CFPB director has the power to decide whether American families can obtain a mortgage, get a car loan or even get a credit card. My hope is that the decision to renominate Mr. Cordray will open the debate about whether some common sense checks and balances will be placed on a massive bureaucracy that is now totally unaccountable to the American people.”

Despite the GOP’s reservations, the Cordray’s CFPB has been a great success, cleaning up the mortgage servicing industry, winning refunds for credit card customers, and preventing wrongful foreclosures. The fears of the industry proved baseless, as Cordray has earned praise for working with banks, credit unions, and consumer groups.

Rep. Jeb Hensarling (R-TX), the incoming chairman of the House Financial Services Committee, could not explain during an interview on Wednesday why House Republicans are holding middle- and low-income tax cuts hostage to the cuts for the wealthiest Americans in the fiscal cliff showdown. When pressed by CNN’s Soledad O’Brien, Hensarling first cited complaints about spending, but when O’Brien asked why he couldn’t set spending levels aside and compromise on taxes first, he had nothing but unrelated talking points:

O’BRIEN: Why don’t Republicans and Democrats vote to keep the taxes lower for middle class and people at lower income and let the other ones expire? And you could do that now. And we wouldn’t go over the fiscal cliff.

HENSARLING: What the Speaker has done is exactly what the President claimed he he wanted. The Speaker has put on the table a balanced approach. …

O’BRIEN: You can’t be surprised that the president said no go to that, right? Within only a couple of hours — because it did not increase taxes on the wealthiest Americans, which he has consistently said.

HENSARLING: The President won 51-49. He has an electoral college victory. It’s good enough to get him re-elected but not enough to give him a mandate.

Watch it:

Hensarling’s invocation of Speaker John Boehner’s (R-OH) proposal is not only not an answer to O’Brien’s question — as it doesn’t explain what’s wrong with the simple solution O’Brien poses — but it’s also not anything close to balanced. While Boehner’s plan contains an array of draconian spending cuts, it doesn’t propose any actual increased revenue, relying instead on the same voodoo as the Romney tax plan.

Hensarling’s electoral analysis is equally irrelevant and misleading. Not only did he get the numbers wrong (Obama won the popular vote by roughly double the margin Hensarling suggests), but Democrats made big gains in the Senate and actually won the majority of votes cast for candidates in the House.

Republicans, with help from Wall Street’s biggest banks, have already successfully watered down one of the most important financial regulations included in the 2010 Dodd-Frank Wall Street Reform Act. Now, two House Republicans are attempting to delay the rule’s implementation for another two years, even though it is already behind schedule and likely won’t be finished until 2013.

The regulation in question is the Volcker Rule, which would prohibit certain kinds of risky trades — known as proprietary trades — at banks that are backed by taxpayers and the federal government. Prop trading is widely credited with playing a role in the collapse of the financial industry in 2008, and the Volcker Rule, named for former Federal Reserve chairman Paul Volcker, is aimed at preventing a similar occurrence in the future. Reps. Spencer Bachus (R-AL) and Jeb Hensarling (R-TX), though, are attempting to ensure it won’t take effect for another two years, Bloomberg reports:

“Given the time that it will take for you to agree on one version of the Volcker Rule as well as the tremendous uncertainty that market participants face in trying to anticipate what the final rule will look like, we respectfully suggest that the Federal Reserve Board delay the Volcker Rule’s effective date,” the lawmakers wrote. [...]

“While the Volcker Rule promises little if any benefit, what little benefit it does promise will not be realized if regulators further fragment financial markets and ratchet up the costs of compliance for market participants by issuing multiple versions of the Volcker Rule,” the lawmakers wrote.

Republicans and Wall Street banks lobbied to prevent the Volcker Rule’s inclusion in Dodd-Frank, and though they were ultimately unsuccessful, outgoing Sen. Scott Brown (R-MA) made sure it was watered down before the bill passed. Both the GOP and Wall Street have fought the rule incessantly since its passage, lobbying regulators and Congress to water it down even further. It’s so weak now — it includes a loophole large enough to drive a Mack truck through, according to one of its original authors — that Volcker himself isn’t satisfied with it.

And contra Bachus and Hensarling’s claims, the Volcker Rule provides a major benefit to taxpayers. It will indeed make banks less profitable, but it also makes them safer by shifting risky trading to hedge funds and other institutions that aren’t backed by taxpayers, thus ensuring that risky trading won’t again jeopardize the entire financial system and billions of taxpayer dollars. Despite opposition from the GOP and current bankers, it is backed by former traders and ex-CEOs of major Wall Street banks, including the former Citigroup chair credited with inventing the type of supermarket banks the rule is designed to prevent. The rule, according to a former Merrill Lynch executive, is “necessary to correct a mistake that poses a danger to our economy.”

Current House Financial Services Committee Chairman Spencer “serve the banks” Bachus (R-AL) will have to give up his gavel in the next Congress due to committee term limits. His likely replacement is Rep. Jeb Hensarling (R-TX).

Acknowledging that Hensarling will hold the reins, banks and other financial firms are pouring money into his campaign coffers, despite the extremely safe Republican district in which he is running:

Campaign money has flowed Hensarling’s way, much of it from insurance companies, securities brokers, investment firms and banks. Together, employees of those industries or their political action committees have donated $630,447 to his campaign, according to the Center for Responsive Politics.

Hensarling’s fundraising haul this year is 66 percent more than he received in 2010, when Republicans surged to win control of the House. [...]

Separately, Hensarling has raised $967,421 for his political action committee, another source of money to donate to Republicans. JPMorgan Chase is the largest source of donations to Hensarling’s leadership PAC. Other major donors include hedge fund Mason Capital Management and Bank of America.

The financial sector is far and away Hensarling’s largest contributor, giving him $1.6 million overall in this cycle alone. According to the Center for Responsive Politics, his next largest set of contributors — “miscellaneous business” — gave him $232,000.

As Financial Services Committee Chairman, Hensarling can be expected to continue the House Republican assault on the Dodd-Frank financial reform law. Hensarling was a staunch opponent of Dodd-Frank when the law was being debated, and particularly the law’s creation of the Consumer Financial Protection Bureau. He also called a tax on big banks “frankly lunacy.” Now he is poised to be the big banks’ top man on the Financial Services Committee as it attempts to cripple Dodd-Frank.

The tax plan proposed by Mitt Romney, which he says will avoid adding to the debt and won’t cut taxes for the rich, will work exactly the way the 2003 high-income Bush tax cuts worked, Rep. Jeb Hensarling (R-TX) said during an appearance on CNN on Thursday. Romney has faced criticism over how his tax plan will provide a 20 percent, across-the-board tax cut without adding to the debt or raising taxes on the middle class. The Tax Policy Center, a nonpartisan analyst, recently found that Romney’s plan as outlined is mathematically impossible.

But Hensarling has confidence that it will work, because the Republican Party has tried this before. In fact, Hensarling said, Romney’s tax plan will work just because it followed the “recipe” outlined by earlier GOP-led tax cuts, including the 2003 Bush tax cuts:

HENSARLING: This is the tax plan: fairer, flatter, simpler, more competitive tax code. We broaden the base by getting rid of a lot of these special interest deductions, exclusions — by one estimate, one-third of the tax code is what is known as tax expenditures.

HOST: Why couldn’t Paul Ryan explain that 11 days ago?

HENSARLING: My guess is he could have had he had time. But we did this in ’03, it was done in the Reagan administration, it was done under President Kennedy under JFK, and guess what: when you follow this recipe, you get more jobs, more economic growth, and more tax revenue.

Since their passage, the Bush tax cuts have been a major driver of the nation’s increased debt and deficits. Without the Bush tax cuts, in fact, the nation’s debt would be at sustainable levels.

Even worse, the Bush tax cuts, which the Romney plan maintains before cutting taxes even deeper, were heavily skewed toward the rich and failed to lead to the economic and job growth Republicans promised. The decade following was one of the worst on record for economic, job, and income growth.

Hensarling is correct: the Romney tax plan certainly follows the Bush recipe. That recipe, though, is one that leads to fewer jobs, slower economic growth, and even bigger debts and deficits.

Public sector job losses have held back economic growth during the recovery from the Great Recession, and more bad news came from the U.S. Bureau of Labor Statistics’ monthly employment report this morning. In May, federal, state, and local governments shed 13,000 jobs, adding to an already-record total of losses.

But Republicans ignore that government job losses are holding back the recovery, instead promising to shrink government employment even more. For instance, Texas Rep. Jeb Hensarling (R) told CNN’s Jeffrey Toobin today that the Obama administration has caused a “huge, huge buildup” in the federal workforce that has slowed down private sector job growth:

TOOBIN: One of the striking things about this jobs report, and several of the recent months, ahs been that governments have been laying people off, that government hiring is, that states and localities, don’t have any money to hire people. One of the things you want to do is cut taxes and cut spending. Why do you wnat to see more layoffs of government employees when…employment is such a problem?

HENSARLING: Well, number one, we’ve seen a huge, huge build up, particularly of the federal workforce. What we need is to promote economic growth with fundamental tax reform, and then frankly there wouldn’t necessarily have to be any layoffs. But you’re not going to get fundamental, you’re not going to get economic growth with this president’s policies. And so, what we saw for a long time under the Obama administration and under his stimulus program, which obviously has clearly failed, is we saw private sector jobs lose out while he was increasing federal payrolls whether they needed to be increased or not.

Watch it:

Blaming growth in the federal workforce for the struggles of the private sector has become a favorite Republican talking point, but that doesn’t make it true. In the last three years, the public sector has shed more jobs than any three-year period on record, and more than 600,000 government workers have lost their jobs since Obama took office. The private sector, meanwhile, has now seen 27 consecutive months of job growth and recovered all of the jobs it lost in the opening months of Obama’s term.

The “huge, huge buildup” in the public workforce Hensarling claims took place would have certainly benefited the economy had it taken place, since adding jobs in sectors like education would have increased demand and driven growth. It hasn’t happened, though, because Republicans have repeatedly blocked efforts to send money to states to prevent further layoffs of teachers, police officers, firefighters, and other public employees.