Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Dec 21, 2025 11:16 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
Just a Minute: Tracy Letts’ new drama defies logic and plausibility
When a Pulitzer- and Tony Award–winning playwright can’t get his historical facts straight, there must be a reason. It can’t be as simple as all Native Americans are interchangeable, can it? Read More… In the past 90 years, there have been three periods during which the American intelligentsia has been dominated by the most radical leftists. The first was in the Great Depression. This was when it monplace to say that capitalism had failed and the great hope of the...
Boris Johnson: The great survivor?
British prime minister Boris Johnson has survived a confidence vote in Parliament after weathering months of bad press. He may still be standing, but is he crippled nevertheless? Read More… The vote is in. Boris survived—or did he? The 359 members of the Parliamentary Conservative Party voted by 211 to 148 that they had confidence in Boris Johnson as the leader of the party and prime minister of the United Kingdom. That was a surprise. A much bigger margin of...
Norm Macdonald is gone and there’s nothing funny about that
edian’s last Netflix special was recorded in his home by himself during COVID lockdown, out of concern he would not live long enough to tape it before an audience. What he has to say in these 86 minutes is more than ics manage in their entire careers. Read More… Norm Macdonald was the edian in his time among those who stayed out of political controversies. His specialty was pointing out how fortable we are facing the reality of our human...
Twitter will be no worse with owner Elon Musk, and probably no better
Who buys the 17th-most-popular social media platform in the world is a cause of great concern to relatively few people, who unfortunately have the loudest voices. That’s the real problem, and one Musk almost certainly cannot fix. Read More… Elon Musk has already created the first truly successful electric car. He wants pany SpaceX to put men on Mars. Musk himself has occasionally joked that he wants to die on Mars, just not on impact. Successfully landing and establishing an...
Why Nineteen Eighty-Four still matters
If so many of the catchphrases from George Orwell’s dystopian classic seem cliched today, it’s because there is endless fodder for their application. And while not everything he feared came true, Orwell’s greatness lies not in predicting the future but in changing it. Read More… June 8 marks the anniversary of George Orwell’s Nineteen Eighty-Four. That a greater gap separates us from 1984 than 1984 from Nineteen-Eighty Four’s 1949 publication staggers. The book, at least in terms of pundits’ invoking...
Your job is not your vocation
What we do to sustain life and what we’re called to do for the good of the gospel and our neighbor are two different things. But the first can be put in the service of the second. Read More… It is sometimes claimed—wrongly—that until the Reformation, the only vocations known to Christian teaching were monastic and/or clerical. One might be called to a monastery or called to the priesthood, but ordinary work, family life, secular singleness—these are the things of...
Chinese oppression of the Uyghurs goes global
Even when this ethnic and religious minority finds safe haven outside China, the Chinese Communist Party still manages to harass and threaten them. The United States, as well as other nations of goodwill, should not tolerate the exporting of repression by a foreign power. Read More… Under Xi Jinping, the People’s Republic of China (PRC) has returned to its Maoist past. Both Xi and Mao Zedong promoted party and especially personal rule. Both sought to extinguish even the hint of...
The Catholic Church is the West’s best ally in the Pacific
The tiny region of North Bougainville in Papua New Guinea may not be on many people’s radars, but it could hold the key to the West staving off further Chinese aggression in the Pacific. But the West will need help. Enter the Catholic Church. Read More… It was the Cold War, and Portugal’s empire was collapsing. The dictatorial regime established by António de Oliveira Salazar was enduring a revolution, and thus the once great colonial enterprise that ruled some of...
Fix America’s broken schools before it’s too late
A new book is very good at pinpointing what’s gone wrong with our public school system. However, when es to concrete solutions, it’s missing in action. Conservatives especially need to do better if their voices are going to be heard. Read More… There’s a currently a revolution erupting in public school districts across the country. For quite some time, students haven’t been learning, teachers haven’t been teaching, and educational leaders have only been making things worse. In response, parents have...
The Right look at American conservatism deserves your attention
In his new book, Matthew Continetti details the 100-year history of the battles between the “Right” and conservatives, between populism and neoconservatism. In short, there were more than a few Donald Trumps before 2016, and Conservatism Inc. isn’t dead yet. Read More… In January of 1992, the libertarian theorist Murray Rothbard published an untimely reflection in the traditionalist journal Chronicles. The conservative and Republican elite had effectively scuttled former Klansman David Duke’s bid to e governor of Louisiana. In the...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved