WASHINGTON — If Democrats hated House Republicans' original stab at reform of the Dodd-Frank Act, a revised version floated Thursday was radioactive from their perspective, with provisions that would make the Consumer Financial Protection Bureau a hollowed-out shell of itself while dialing back the intensity of stress tests.

It immediately raised questions about the political strategy of House Financial Services Committee Chairman Jeb Hensarling, R-Texas, who knows that any rollback's best chance lies with its ability to attract at least a few Democratic supporters. While Hensarling's bill could likely clear the House, Democrats have more than enough seats to filibuster legislation they oppose.

Yet Sen. Sherrod Brown, the lead Democrat on the Banking Committee, wasted no time blasting Hensarling's proposed changes, which were detailed in an alleged committee memo circulated among leadership of the panel. (A spokesman for Hensarling would not confirm its authenticity.)

"The Hensarling proposal would transform the bureau from an effective watchdog into a toy poodle – nice enough if that’s your taste, but not very useful. They have taken a bad bill and made it even worse," Brown said.

"They have taken a bad bill and made it even worse," said Sen. Sherrod Brown, D-Ohio, of proposed changes to House Republicans' Dodd-Frank rollback bill. Bloomberg News

That followed similar opposition from Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, who said the revised version "is even worse than the original," calling it a "disastrous blueprint."

While clearly the revisions — details of which can be found here — are not designed to win over Democrats, industry analysts and representatives said Hensarling has his eye on the long game. They argued he is trying to push for as much as he can in the hopes that when negotiations happen between the House and Senate, the final bill will move further to the right.

“That thing is pure negotiation,” said Richard Hunt, president of the Consumer Bankers Association. “In the House, you start as far as right as you can so the Senate might then have a chance of passing balanced regulation.”

Interestingly, Hensarling abandoned one idea long pushed by Hunt and other bankers — turning the CFPB into a commission — instead focusing on clipping the agency's wings in other ways. The revised bill would stop the CFPB from directly supervising any company while removing its power to crack down on abusive and deceptive practices, among other things.

Hunt blamed Sen. Elizabeth Warren, D-Mass., for failing to negotiate with Republicans over the structure of the CFPB when she had a chance.

"Elizabeth Warren put the CFPB in jeopardy by not allowing moderate Senate Democrats to negotiate in good faith last year with the Republicans, with industry to create good bipartisan solutions,” said Hunt. “So the blame does not go to anybody but Elizabeth Warren.”

Craig Nazzaro, of counsel at Baker Donelson and a former vice president at JPMorgan Chase, said the turnaround on the single director was "stunning from an operational perspective," and a blow for the industry.

"While an independent director has the ability to push through an agenda without oversight, a director installed with any new incoming president, lends itself to volatility because every four or eight years they will install a new director and go another way," Nazzaro said.

He said Republicans appear to be going down the same road the Democrats took in 2008 to 2010, which led to what some believe was overreach in reaction to the financial crisis.

"2008-2010 was a reaction, this is more like revenge," Nazzaro said. "They are going to push as much through as they think they can get. There will be opposition for sure." The Republicans "thought the brass ring was moving it to a commission, up until the change in administration, the surprise win in November."

While the revisions outlined in the Hensarling memo drastically restrict what the CFPB can do, it would still give it direct rule-writing authority over several federal consumer protection laws. That is likely being done to allow a GOP director to weaken existing restrictions under those laws, some said.

"This approach would make [the CFPB] into little more than the Federal Trade Commission, but the director would keep the control over the federal consumer laws — so one person could radically pare them down," said Joe Lynyak, a partner at Dorsey & Whitney.

Many Republicans, meanwhile, will be thrilled with the CFPB changes. The GOP has long opposed the agency's existence, and the outlined alterations to the Hensarling bill would mostly neuter the bureau.

“I am very happy he is going after the CFPB harder,” said Norbert Michel, a research fellow in financial regulations at the Heritage Foundation. “If I could only have one thing, I probably would have picked that.”

Consumer groups, meanwhile, quickly joined Democrats in opposition.

"It would hack away at crucial rules that prevent reckless banks from blowing up the financial system and the broader economy," said Lisa Donner, executive director of Americans for Financial Reform. "It would gut the CFPB’s authority, and tie its hands behind its back, stopping the effective work it is doing to holding companies accountable."

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