Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Apr 23, 2026 10:16 PM

Dodd-Frank regulations, originally scheduled to take effect on July 16, are intended to create market stability. Instead, they are doing just the opposite.

Regulations aimed at financial derivatives, incorporated into the Dodd-Frank Wall Street Reform and Consumer Protection Act that was signed into law last July, have recently been rescheduled to take effect on December 31. The regulations are aimed at reducing the risk of derivatives, a contentious issue among those debating the root cause of the financial crisis. A Reuters’ report suggests this legislation will create uncertainty and a legal void for the derivatives market. Fears that trades could be challenged or invalidated may send the market for swaps (over-the-counter derivatives) into “legal limbo,” according to NASDAQ News.

Scott O’Malia, missioner of the Commodity Futures Trading Commission, told Reuters,

I have concerns that this proposal will not provide the appropriate level of legal certainty, and if it is to last only a few months, will likely only serve to further confuse and frustrate the markets and market participants.

Legal delays and uncertainties are only a small part of a much larger problem. Saturated with 2,253 pages of confusing regulation, Dodd-Frank is considered to be the most drastic financial revision in 80 years.

Former U.S. Senator Judd Gregg, now an adviser to Goldman Sachs, says Dodd-Frank goes too far for our good. He argues the regulation will hurt job creation and smother economic growth:

The consequences will be a massive transfer of economic activity overseas and an equally massive contraction in the liquidity and credit that keeps U.S. petitive and vibrant.

Though intended to stabilize the financial market, Dodd-Frank is creating more uncertainty and instability at our liberty’s expense. Regulation will petition and stifle individual freedom. In an attempt to correct the immoral behavior on Wall Street, the government promising the dignity of the individual by reducing financial choices.

In mentary titled “Credit Crunch, Character Crisis,” Samuel Gregg, the Director of Research at the Acton Institute, discusses the financial and moral costs of similar risk-controlling regulation in the past:

A longer-term problem is that this failure may facilitate calls for more financial regulation, much as the Sarbanes-Oxley Act was a response to America’s 2000-2001 corporate scandals. The evidence is growing that Sarbanes-Oxley has proved extremely costly for business. Even Sarbanes-Oxley’s authors now concede many of its provisions were badly drafted.

According to a University of Pittsburgh study, Sarbanes-Oxley’s discouragement of prudent risk-taking and its generation of pliance-costs have contributed to many firms listing themselves in the City of London rather than Wall Street. This has also been facilitated by Britain’s Financial Services Authority’s shift away from Sarbanes-Oxley-like procedural approaches to financial regulation, towards principles-based regulation which focuses on (a) the behavior reasonably expected from financial practitioners and (b) good es.

In the end, however, no amount of regulation — heavy or light — can substitute for the type of character-formation that is supposed to occur in families, schools, churches, and synagogues.

These are the institutions (rather than ethics-auditors and business-ethics courses) which The Wealth of Nations’ author, Adam Smith, identified as primarily responsible for helping people develop what he called the “moral sense” that causes us to know instinctively when particular courses of action are imprudent or simply wrong — regardless of whether we are Wall St bankers or humble actuaries working at securities-rating agencies.

Perhaps the recent financial turmoil will remind us that sound financial sectors rely more than we think upon sound moral cultures.

Gregg’s economic and moral analysis suggests regulation cannot build character. The implicit goal of Dodd-Frank is to achieve moral ends on Wall Street through coercive means — expanding government oversight. We must remember virtue cannot be artificially manufactured by increased regulation; rather virtue requires freedom to choose the proper course of action. Moral character in the business world should be encouraged by a proper incentive structure, but even more importantly by the values taught in our social institutions.

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
‘Man is man’s greatest resource’
recently asked me ment on statements made by Ettore Gotti Tedeschi, president of the Vatican bank, about the economic effects of demographic decline in Western industrialized countries. Tedeschi told the Zenit news service that the “true cause” of the financial crisis is the low birth rate in these countries. “Instead of stimulating families and society to again believe in the future and have children […] we have stopped having children and have created a situation, a negative economic context...
Caring for the Persecuted Church
Power Line has a post over at its site titled “Why Don’t Christians Care?” Glenn Reynolds at Instapundit also linked to the post today. Powerline’s question refers to the lack of concern from the “mainstream” munity on Christians being massacred by Muslims in the Middle East and Africa. It’s a great question to ask. Just for the record, we want to remind people that the Acton Institute cares. Last month I wrote a piece that received a lot of attention...
Saving Catholic Schools
In many urban areas, maintaining Catholic schools and maintaining some semblance of educational choice are synonymous: the old Catholic schools represent the only alternatives to a big, clumsy, and often unsatisfactory public school district. The issue is especially poignant because the student populations served by these schools are frequently the most educationally challenging populations in the nation. Thus, proponents of school choice are dismayed at the continued shuttering of dozens of major-city Catholic schools across the country. The search for...
NIV Stewardship Study Bible: ‘A remarkable resource…’
Rev. Jerry Hoffman, Director of the Center for Stewardship Leaders at Luther Seminary, reviews the NIV Stewardship Study Bible. “What I found was a remarkable resource that leads one to see how strong the stewardship thread exists throughout scripture…. I anticipate using this resource in my writing, preaching and teaching,” he says. To keep abreast of the different resources available on stewardship, e of a fan of the NIV Stewardship Study Bible on Facebook and follow the Twitter feed @Oikonomeo,...
Read My Lips
“…we are setting an ambitious goal: all students should graduate from high school prepared for college and a career – no matter who you are or where e from.” – Barack Obama, Saturday Radio Address. A few years ago I asked a friend and business owner why he put value on a college diploma when talking with entry level talent who had majored in subjects incredibly tangential to his job descriptions. He answered, “Well, it shows they can finish something.”...
The Scars of Ceausescu
It is a good thing from time to time to step back and remember just what it is that we who believe in the free society fight for each day. I stumbled across Michael Totten’s exploration of Romania – Twenty Years After the Fall of the Tyrant. With the passage of time, it is easy to forget – at least for those of us who never directly experienced it – just how suffocating and cruel the Communist dictatorships of the...
Video: Liberating Black Theology
Joseph D. Martinez, a 2008 alum of Acton’s Toward a Free and Virtuous Society program, produced a great video to introduce readers to my new book, Liberating Black Theology (now in the Acton Book Shoppe. Buy it here). Thanks, Joe! “Liberating Black Theology” book promo from Joseph D. Martinez on Vimeo. ...
Melanchthon on the Gospel’s Social Implications
The hugely influential reformer Philip Melanchthon (1497-1560) writes in mentary on Romans 13: Meanwhile, the Gospel teaches the godly properly about spiritual and eternal life in order that eternal life may be begun in their hearts. In public it wants our bodies to be engaged in this civil society and to make sure of mon bonds of this society with decisions about properties, contracts, laws, judgments, magistrates, and other things. These external matters do not hinder the knowledge of God...
Two Cheers for the Bishops of England and Wales
Choosing the Common Good from Catholic Westminster on Vimeo. In today’s Acton Commentary, I review a new statement titled Choosing the Common Good (download it here) from the Catholic Bishops’ Conference of England and Wales. In the introductory video linked above, The Most Rev. Vincent Nichols, Archbishop of Westminster, introduces Choosing the Common Good and discusses the key themes in Catholic Social Teaching “as a contribution to the wide-ranging debate about the values and vision that underpin our society.” Here...
Tiger Woods, Morality, and the Market
Via Victor Claar (follow him on Twitter here), an op-ed in The Oracle (Henderson State University’s student paper) by Caleb Taylor, “Tiger Woods and Capitalism.” A taste: “Contrary to what Michael Moore thinks, capitalism promotes moral and ethical behavior. In Woods’ case, it punishes poor behavior. Sponsors such as Nielsen, AT&T, Gillete and Gatorade have all either suspended or removed their endorsement deals with Tiger due to his moral mistakes.” ...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved