WASHINGTON — President Trump Monday signed a sweeping executive order requiring every "executive department or agency" to relinquish two regulations for every new one it proposes — but the order’s scope is ambiguous, as is the actual burden it will place on banking regulators.

Although Trump prefaced the order by calling the Dodd-Frank Act a "disaster" and pledging "to be doing a big number" on the law, it does not appear to immediately impact the banking and credit union regulators. A White House spokesperson reportedly clarified that Monday's order would not apply to independent agencies, and the way it was written would directly capture only those agencies that report to the Office of Management and Budget, which does not include the financial institution regulators.

At the same time, however, that doesn't mean the order — or another like it — won't be levied against the independent agencies in the future. And some said the banking regulators might voluntarily attempt to agree with this order, much as they did for one issued calling for a hiring freeze.

"It's an interesting question as to whether the agencies are entirely exempt," said Kevin Petrasic, a partner at White & Case and former regulator at the Office of Thrift Supervision. "While asserting their independence, the agencies have historically tried to … be accountable to administration policy or procedures put in place, especially in the beginning of a new administration.”

President Trump today signed an order requiring federal agencies to eliminate two regulations for every one is proposes, and hinted that he would "do a big number" on Dodd-Frank. Bloomberg News

Jaret Seiberg, managing director of Cowen Group, agreed, saying the agencies would likely at least attempt to fall in line behind the president.

"There is a good chance the banking agencies will try to comply with the executive order just like they announced they would freeze hiring in response to Trump's other directive," Sieberg said in a research note Monday. "This is done both out of general deference to the president and to limit the political fallout that could occur if an agency were seen as defying the White House."

Yet regardless of how binding the order is on financial regulators, there was a great deal of skepticism among experts as to whether the order would be effective on its own terms.

Pratin Vallabhaneni, an associate with Arnold & Porter Kaye Scholer, said the order could backfire by cutting out meaningful and helpful guides for industries — including banks — to use when deciding whether their activities violate the law or not.

“Even if a regulation goes away, the agency will still have the statute to enforce — which is kind of messy, because the entire purpose of the regulation is to outline in more detail how to enforce that statute,” Vallabhaneni said. “When you take away the regulation, you have this very ambiguous, high-level statute that is probably the product of congressional compromise, and no one will know the agencies will apply it.”

Petrasic said it would also be relatively simple for agencies to combine rules together, thus “eliminating” some regulations while preserving the requirements elsewhere. The order, then, is more about appearing to reduce regulation than it is about actually cutting regulatory burdens.

“There’s lots of way that that could be gamed. You could combine two regulations with one regulation, and you meet the two-for-one requirement,” Petrasic said. “A bit of this is optics, and I think the real meaningful reform and the policy debates that will need to occur … that’s really the more important thing.”

V. Gerard Comizio, a partner at Fried Frank, said that there are also plenty of old and mooted rules on the books that regulators could sacrifice in order to comply with the order. But the real regulatory changes would have to come from legislation, not through executive orders.

“The question is, is this just going to turn into another make-work project where agencies are going to have to scour meaningless and unused regulations in their inventory every time they take care of business they need to, or will it meaningfully reduce the regulatory burden on the industry,” Comizio said. “I think the answer is the former.”

But H. Rodgin Cohen, a partner at Sullivan & Cromwell, said that even if the executive order does little more than reduce the ancient regulatory clutter and unenforced and obsolete rules, it could still be a worthwhile exercise.

“It’s ironic, in a way, that the regulators dislike complexity in banks. The converse is, banks dislike complexity in regulation,” Cohen said. “So maybe we should all look for a simpler regulatory model.”

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