Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Jan 12, 2026 5:49 AM

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
Top 10 PowerBlog posts for 2016
As e near to the end of another year, we want to thank readers of PowerBlog for menting, and sharing our posts over the past twelve months. If you’re a new reader we encourage you to catch up by checking out our top ten most popular posts for 2016: 1. Work is a gift our kids can handle Joseph Sunde The abundant prosperity of the modern age has brought many blessings when es to child-rearing and child development, offering kids...
14 can’t-miss predictions for 2017
At the beginning of 2016, piled a list that included 1,034 predictions for ing year. I later went through and narrowed it down to the top 500 that I was absolutely certain would happen. Even after cutting the list down, though, I only managed to achieve a 67 percent accuracy rate. (Unfortunately, I forgot to post that list in public so it is difficult to verify. You’ll just have to take my word for it.) This year, in an attempt...
5 victims of the $15 minimum wage
As protests for a $15-per-hour minimum wage continue to rage across the country, cities like Seattle and states like California and New York have already begun to adopt such schemes. But alas, prices are not play things, and such measures are bound to reap a range of deleterious effects, from raised consumer prices to increased unemployment to reduced working hours to outright business closures. Contrary to the popular narrative, those consequences tend to hit small businesses and less-skilled workers first...
It’s time to kill the penny
Over the past twelve months there have been considerable discussions of monumental public policy issues. But before 2016 ends we need to consider one more of (in)significant importance: what to do about the penny. As the Wall Street Journal noted earlier this week, in fiscal 2015, the cost to produce a single penny was 1.43 cents. In 2014, that cost rose to 1.66 cents. Despite years of effort to wring costs out of production, it is doubtful the copper-coated coin...
Thomas Sowell’s escape from socialism
Earlier today I mentioned that economist Thomas Sowell was retiring from writing his syndicated column. For decades Sowell, age 86, has been one of the leading thinkers in the libertarian and conservative circles. But what is less known is the intellectual journey he took from being an advocate of socialism to a champion of free markets. This past summer I wrote an article for The Stream examining on how Sowell thought his way into Marxism, then back out again into...
The end of black conservatism?
On December 27, 2016, at the age of 86, Thomas Sowell published his last column. After publishing dozens of books and hundreds of columns, Dr. Sowell’s retirement may mark the beginning of the end of an era of black intellectuals who were champions of political and economic liberty. Other black scholars like Walter Williams, W.B. Allen, and Shelby Steele are all in the 70s or 80s and there does not seem to be a cadre of like-minded black scholars in...
Humbug or helpful? UK not forcing shops to close on holiday
Although Americans have lost the notion altogether, British tradition still remembers that Christmas is a season that begins, rather than ends, on December 25. In addition to Christmas, many businesses close their doors on December 26 in observance of Boxing Day. Over the years, the holiday has also e the UK’s third-largest shopping day, generating £3.74 billion last year. Since shoppers need workers to serve them, more retailers have remained open each year. This spurred more than 200,000 Brits to...
Pope Francis and his fans on the left
Since 2013 when the Argentine prelate Jorge Bergoglio officially became the head of the Catholic Church, he has emerged as a key figure in the progressive movement. Even though Pope Francis does not claim to be a part of any political movement, it is clear that he is representative of the views that many leftists hold. With his emergence e much criticism from Catholics who hold opposing views on issues such as environmentalism and the market economy. Acton Institute Director...
Commentary: Power and the poor
In this week’s Acton Commentary I examine the foundations of what is today identified as the “preferential option for the poor” in writings that appeared 125 years ago, Pope Leo’sRerum Novarum and Abraham Kuyper’s “The Social Question and the Christian Religion.” These two texts have appeared in an anniversary volume,Makers of Modern Christian Social Thought: Leo XIII and Abraham Kuyper on the Social Question, now available from the Acton Book Shop. In the introduction to that volume, I touch on...
The Year in Acton Commentary 2016
Every Wednesday we publish the Acton Commentary, a weekly article that covers topics related to Acton’s mission. As es to a close we thought it would be worth highlighting the top mentaries produced by Acton Institute staffers and contributors over the past year. 1.Global elites put Christianity in the crosshairs Global governance ideology is the intellectual stepchild of Marxist materialist thought, says Robert F. Gorman. The term global governance refers to the political dimension of globalization. Here the question is...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved