Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Apr 24, 2026 10:24 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
Are High Gas Prices Affecting Job Seekers?
Gas prices are beginning e down, but for many people prices are not falling fast enough. The pain caused by high gas prices is spread widely, but it is felt intensely on the working poor and the unemployed who are trying to find a job. A recent story in the Chicago Tribune highlights Alicia Madison, a resident of the Chicago suburbs who is unemployed. Madison is looking for a job, but because of high gas prices she, at times, cannot...
Free Economies Must Grow On Solid Principles
The Acton Institute captured the attention of the Italian secular press when advocating a Judeo-Christian, value-based economic model to ensure continued free and healthy economic growth in Asia. The press was eager to interview the conference speakers who articulated this perspective at the Institute’s international conference held at Rome’s Pontifical Gregorian University last May 18: “Family-Enterprise, Market Economies, and Poverty: The Asian Transformation” . In the following Video, Istituto Acton Director and conference moderator, Kishore Jayabalan, spoke candidly to UniRoma...
The Return of Christian Europe?
Doubtful, at least on these terms. Does the institutional church have to officially advise the government in order to have influence? — European institutions “more open than ever” to church co-operation By Jonathan Luxmoore Warsaw, Poland (ENInews)–A senior ecumenist has ed growing co-operation between leaders of European institutions and churches, and predicted a growing advisory role for munities. “I think we’re seeing a greater openness today than ever before,” said Rudiger Noll, director of the Church and Society Commission of...
Muslim Women and Entrepreneurship
One might think that Muslim women, in traditionally Muslim countries, are under severe constrictions when es to ing entrepreneurs. After all, in Saudi Arabia, women cannot drive, and in places like Iran, women are forced to veil themselves under the law. Do such restrictions create undue burdens for women wanting to start and maintain businesses in the Muslim world? In a study published in International Management Review (Vol. 6 No. 1 2010), John C. McIntosh and Samia Islam of the...
Rev. Sirico: Change thinking on poverty
Last week in Rome the Acton Institute presented a promotional video for the PovertyCure initiative before an international audience of businessmen, scholars, journalists, graduate students and missionaries in attendance at the Institute’s May 18 development economics conference: “Family-Enterprise, Market Economies, and Poverty: The Asian Transformation.” The Acton Institute is one of many partners in this new initiative made up of a network of individuals and organizations looking for free-enterprise solutions to poverty. The video caused quite a stir in the...
The Capitalist Structures of Hinduism
Thanks to P. Koshy @pkoshyin and Saurabh Srivastava @SKS_Mumbai for linking this 1996 Religion & Liberty gem on Twitter. Author Mario Gómez-Zimmerman argues that Hinduism “pre-figures capitalism much closer than socialism.” More: As it is true for all the great religions, Hinduism warns human beings about the dangers of accumulating wealth, and at times demands them to renounce it. But in all cases, wealth is attacked because it is likely to subject man to dependency, fostering egoism, greed, and avarice,...
Acton Commentary: Little Plots of Liberty
In this week’s Acton Commentary I briefly survey the prospects for urban gardens and farming in the city of Detroit. As Aaron M. Renn wrote in New Geography a few years ago, Detroit represents one of the places where significant urban innovation is possible. “It may just be that some of the most important urban innovations in 21st century America end ing not from Portland or New York, but places like Youngstown and, yes, Detroit,” writes Renn. Detroit’s woes are...
Memorial Day: Stories from the Virtual Wall
When I first went to work for former Mississippi Congressmen Gene Taylor, I was going through a file cabinet and spotted a thick folder with the name “J.C. Wheat.” I sat down and read through it. J.C. was the father of Marine Lance Corporal Roy Mitchell Wheat. The folder contained all the things Congressman Taylor had done in helping to pay tribute to J.C.’s son. A Naval ship was christened in Roy Wheat’s name in 2003. I felt a little...
Evangelicals, Common Grace, and Abraham Kuyper
Recently, the Acton Institute announced a partnership with Kuyper College to translate Abraham Kuyper’s Common Grace. Understanding the importance of reaching out to the munity, Kuyper’s work is essential in developing evangelical principles and social thought. The Common Grace translation project is summarized by the Acton Institute: There is a trend among evangelicals to engage in social reform without first developing a coherent social philosophy to guide the agenda. To bridge this gap, Acton Institute and Kuyper College are partnering...
Audio: The Intersection of Faith and Business
Andreas Widmer makes a point as Michael Miller looks on last week in Boston Last week in Boston, Acton’s Director of Media Michael Miller and Seven Fund co-founder Andreas Widmer joined host Scot Landry on The Good Catholic Life on 1060 AM to talk about enterprise solutions to poverty, the intersection of faith and business, and the PovertyCure initiative. You can hear the interview via the audio player below: [audio: ...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved