Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Nov 29, 2025 5:09 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
Criminal justice reform: Possible effects of the First Step Act
This is part three of a series on criminal justice reform. The First Step Act was one of the last laws passed by the 115th Congress and signed by President Trump before the current federal government shutdown. The act, which largely focuses on recidivism reduction through prison reform and some sentencing reforms, is also notable for the generally bipartisan support it received. In this finalpart of a three-part series on criminal justice reform, we’ll consider some of the implications of...
Reviving the spirit of free trade
The current support for tariffs in the United States has left me disappointed, frustrated, and in many unproductive debates. The French political philosopher, Frédéric Bastiat, best articulated my sentiments in an 1847 letter to Richard Cobden, “And I want not so much free trade itself as the spirit of free trade for my country. Free trade means a little more wealth; the spirit of free trade is a reform of the mind itself, that is to say, the source of...
6 Quotes by Teddy Roosevelt on virtue and character
Yesterday was the centennial anniversary of the death of Theodore Roosevelt. There are many areas of policy and politics where those of us at the Acton Institute would differ with America’s 26th president. But we share mitment to virtue and character, and its importance for both individual flourishing and for public life. In honor of this anniversary, here are six quotes by Roosevelt on those character and virtue: On virtue and success in life: “There are many qualities which we...
Alejandro Chafuen in Forbes: The U.S. economy in 2019 – challenges and lower expectations
Where is the economy heading in 2019? Changes in economic growth are much less volatile than the performance of stock markets. In order to forecast what will happen in an economy it is better to focus on the fundamentals, which is to say, examining causes rather than effects. In my forecast for 2018, I included as a factor of my optimism the increase in value of U.S. stocks during the first years of the presidency of Donald J. Trump. This...
How do we measure inflation?
Note: This is post #105 in a weekly video series on basic economics. Inflation is an average rise in prices. But how exactly is this average rise in prices measured? In this video by Marginal Revolution University,Alex Tabarrok explains how inflation in the United States can be measured using theBureau of Labor Statistics’ Consumer Price Index (CPI)—a weighted average of the price increases. We can calculate the inflation rate by the percentage change in the CPI over a given period...
6 Quotes: Richard John Neuhaus on politics and religion
Richard John Neuhaus, founder of First Things magazine, died ten years ago today. Fr. Neuhaus was a Lutheran minister before ing a Catholic priest, and a radical liberal activist before ing a leading voice for religious and political conservatives. In honor of this anniversary of his passing, here are six quotes by Fr. Neuhaus on politics and religion: On politics, culture, and religion: “Politics is chiefly a function of culture, at the heart of culture is morality, and at the...
Unemployment as economic-spiritual indicator — December 2018 report
Series Note: Jobs are one of the most important aspects of a morally functioning economy. They help us serve the needs of our neighbors and lead to human flourishing both for the individual and munities. Conversely, not having a job can adversely affect spiritual and psychological well-being of individuals and families. Because unemployment is a spiritual problem, Christians in America need to understand and be aware of the monthly data on employment. Each month highlight the latest numbers we need...
Explainer: What you should know about the U.S. president’s emergency powers
What just happened? Last Friday President Trump said he was considering using his national emergency powers to secure funding for the construction of a border wall between U.S.-Mexico border. “We can call a national emergency and build it very quickly,” said the president. What are national emergency powers? The President of the United States has certain powers that may be exercised in the event that the nation is threatened by crisis, exigency, or emergency circumstances (other than natural disasters, war,...
What Alexandria Ocasio-Cortez gets wrong about Europe
During her interview with 60 Minutes on Sunday, newly sworn in Congresswoman Alexandria Ocasio-Cortez justified her vision of democratic socialism by invoking a caricature of Europe. When asked if she wanted to turn the United States into a version of Venezuela or the Soviet Union, Ocasio-Cortez demurred with an incredulous smile. “What we have in mind,” she said, according to the transcript, “and what of my — and my policies most closely re— resemble what we see in the U.K.,...
Is capitalism making us fat?
As workers emerge from the holidays an average of one pound heavier, weight loss tops every list of New Year’s resolutions. Yet in 2019, physicians are asking politicians to classify obesity as a disease to be treated by taxing sugary foods – and mentators are blaming our penchant for overindulgence on the capitalist system. If obesity is a disease, then in the West it is an epidemic. Some 40 percent of Americans and 30 percent of adults in the UK...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved