Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Dec 8, 2025 11:17 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
Acton Commentary: Commodifying Compassion
In this week’s Acton Commentary, “Commodifying Compassion,” I look at the instinct to judge a mitment to charity by the level of material expenditure, particularly by the government. One of the things I think is true in this conversation is that our mitments do show something about our spiritual concerns. So I can agree with Brian McLaren, then, that “America’s Greatest Deficit is Spiritual, Not Merely Financial.” But where I can’t go with him is to the conclusion that changing...
Red-Winged Menace
Grand Rapids has been the focus of national attention over the last week or so, most recently for the services surrounding the passing of former First Lady Betty Ford. In the midst of loss and mourning, there’s some cause for levity. See, for instance, this local news story that is getting some coverage around the country, “Angry bird attacks during Ford services.” I myself have been a victim of this red-winged menace! Some of you may have heard that one...
How Comfy Are Faculty Lounges
In the opening scenes of the classic movie version of Thorton Wilder’s play “Our Town” the narrator tells us that the newspaper boy we are watching toss papers onto the porches nearby will go on to college — an ivy league college I recall — but is sent to Europe during WWI and dies. “All that education for nothing,” he laments. Naomi Riley has written another book about academia. The large type on the book jacket reads “The Faculty Lounges”...
Stewardship and Information Technology
I usually feel sorry when I see the latest news about promise, hacks, or identity theft. Though I feel for the victims, I also think about the individuals carrying out the act. Society rightly looks down on such behavior, especially if the victims are everyday people. What about when a high profile organization or government is hacked? What if an organization of questionable reputation is targeted? The online group Anonymous often aims at high profile targets with their hacks, DDoS...
Jayabalan on Austerity and the Italian Budget
Kishore Jayabalan, Director of Istituto Acton in Rome, was interviewed by Vatican Radio to discuss the Italian budget. Italy has a large budget crisis, and if it isn’t resolved, it may face serious financial problems similar to those experienced by Greece. Lawmakers in Italy have begun working on austerity measures, which was the topic of Jayabalan’s interview: “Austerity is fairly important for the Italian economy,” says Kishore Jayabalan, the director of the Rome office of the Acton Institute. But he...
Listening to Eastern Christianity through the ‘Melody of Faith’
Armenian Orthodox theologian Vigen Guroian’s The Melody of Faith (2010) seeks to provide an introduction to the basic dogmas of Eastern Christianity, harmonizing various Eastern Christian traditions (and making significant mention of a few Western ones) through continual reference to their writings, to their icons, and especially to their hymnody. The book, however, makes no claim to “constitute a systematic account of the Christian faith in the Germanic style of rational academic theology” (xi). Instead, Guroian muses, It may be...
Budget Hero
This is a fun, little online game from the American Public Media group called “Budget Hero.” It is described by the organization as follows: Budget Hero seeks to provide a values- and fiscal-based lens for citizens to examine policy debates during this election year. Partisan messages tend to cloud the real issues at play during campaigns, and most candidates are loath to attach detailed financial impacts to solutions which make up their platform. Budget Hero provides an interactive experience involving...
Who is My Brother’s Keeper?
Back in February 2008, then candidate for president Barack Obama addressed a crowd at a General Motors Assembly Plant in Janesville, Wis. He said, …I am my brother’s keeper; I am my sister’s keeper– that makes this country work. It’s what allows us to pursue out individual dreams, yet e together as a single American family. E pluribus Unum. Out of many, one. It is ironic that Obama preached a “we’re-in-this-together” economic philosophy yet three years later, Main Street is...
Catholic Social Teaching and the Federal Budget
Both the religious right and left have weighed in during the heated federal budget battle as Congressman Paul Ryan’s proposed budget has seen its fair share of support and criticism from many religious leaders. In a recent article appearing in Our Sunday Visitor Congressman Ryan explains how he used Catholic social doctrine to help draft his proposed budget opening up with his views on it should be utilized by politicians: Catholic social doctrine is indispensable for officeholders, but there’s a...
Water: A Right or a Commodity?
Water is ing scarcer and even more of a necessity than it was before. And while stories of water scarcity typically occur in underdeveloped, arid countries, the United States and other developed countries must realize they are no longer exceptions and must take into consideration the importance of water and the allocation of its use. A recent article in the Wall Street Journal explores the severe lack of water in Palm Beach, Florida. Residents are restricted to once-a-week watering schedules...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved