Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Mar 30, 2026 10:11 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
The Giving Thing
John Stossel’s 20/20 show last Wednesday night, “Cheap in America,” asked the tough questions about American generosity. It was an intriguing piece, weaving contrasting arguments for two key conclusions: Bureaucracies, government ones and even big charity ones (national or international), just don’t do as good a job as private, local donors and charities; and (2) Americans are truly more generous than any other people on the planet–no matter their means. Rich and poor alike give generously. So the “Cheap Americans”...
‘There’s no injury if there’s not global warming.’
I have read through the opening arguments (PDF) in Massachusetts, et al., v. Environmental Protection Agency, et al. (05-1120) conducted yesterday morning before the Supreme Court. From a layperson’s perspective I would have to say that Jonathan Adler’s characterization of the nature of the proceedings in not quite correct. Adler writes, “It is also important to underscore that this case is not about the science of climate change. There is no dispute that human emissions of greenhouse gases affect the...
Can a free and virtuous society have nuclear weapons?
As a former disarmament policy analyst for the Holy See in New York and in Vatican City, I was recently asked ment on its position on nuclear disarmament by the National Catholic Register; the article can be found here. The reason for raising the issue now was a Nobel laureates’ peace conference in Rome hosted by former Soviet leader Mikhail Gorbachev. The article describes the Holy See’s views as mainly expressed by Canadian Senator Douglas Roche, who also served on...
Catholic Latin America: A Turning Point?
Latin America’s Catholic bishops are preparing for a major conference in Brazil next spring and the agenda will include, aside from issues relating directly to the faith, discussions about politics, populism, corruption and economic globalization. Samuel Gregg says the meeting holds great promise: “Few realize it, but May 2007 could be a decisive moment for Catholic Latin America.” Read mentary here. ...
Speaking of the Decline of Western Civilization…
UNICEF warns that AIDS is at near epidemic levels in Eastern Europe. One might think that in an age of modern science and enlightened medicine, we might see calls for partner reduction programs and partner notification programs. But, as we know, AIDS activists have blocked any meaningful moves along those lines. Instead we have this: In Europe, AIDS awareness was raised with religious services and agitprop art… In Copenhagen, Denmark, artist Jens Galschioet put up an 8-foot sculpture of a...
Two New Book Reviews in CTJ
I have reviewed two books for the latest issue of Calvin Theological Journal: J. William Black, Reformation Pastors: Richard Baxter and the Ideal of the Reformed Pastor (Waynesboro, GA: Paternoster Press, 2004). Appearing in CTJ, vol. 41, no. 2 (November 2006): 370-71. Peter Golding, Covenant Theology: The Key of Theology in Reformed Thought and Tradition (Ross-shire, Scotland: Mentor, 2004). Appearing in CTJ, vol. 41, no. 2 (November 2006): 385-88. ...
The Pornification of Culture
“To pander to this world is to fornicate against you,” confesses Augustine to God. The worldly culture of today seems to be trying its best to actualize Augustine’s observation in literal terms. In a recent edition of New York Magazine, Naomi Wolf writes about “The Porn Myth,” and cites David Amsden who says that pornography is now the “wallpaper” of our lives. Exhibit A in support of Amsden’s thesis is the latest issue of GIANT Magazine, which bills itself as...
School Reform Strategy
If we are ever going to make progress in reforming the education system, we have to find ways to appeal to at least some members of the education profession. Often, teachers, administrators and school boards have distinct strategies. If we can appeal to a subset of educators, we have a better chance of success. Put another way, no school reform can possibly succeed, without the support of at least some members of the education establishment. Here is a story that...
Let the Airline Mergers Begin
Delta Airlines has rejected a hostile $8.53 billion takeover bid from U.S. Airways, saying that it much prefers to remain independent. But Delta, and a lot of other airlines, might be doing consumers a favor by joining a consolidation push, says Anthony Bradley. “Given the nature of the industry today, proper stewardship mercial airlines implies reform,” he writes. Read mentary here. ...
Senators Brook No Dissent
Joe Carter gives us some good context for today: The fact that many people agree on something does not imply that what they agree on is true, whether the issue is climatology or farm subsidies. An appeal to consensus is merely a form of the argumentum ad populum fallacy (appeal to the majority). The status of the fallacy doesn’t change just because the members of the majority all have Ph.Ds. If you want to establish a consensus for your argument,...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved