Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Dec 11, 2025 1:21 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 persistent advantage of private virtue
Several years ago, in a discussion on Charles Murray’s bookComing Apart, Ross Douthat included a brilliant observation about what he dubs the “persistent advantage of private virtue“: Finally, Murray makes a very convincing case . . . for the power of so-called “traditional values” to foster human flourishing even in economic landscapes that aren’t as favorable to less-educated workers as was, say, the aftermath of the Treaty of Detroit. Even acknowledging all the challenges (globalization, the decline of manufacturing, mass...
Transatlantic intelligence: Fast facts on the UK Budget 2017
As Americans made their final arrangements for Thanksgiving, UK Chancellor of the Exchequer Philip Hammond unveiled the annual Budget on Wednesday. Here’s what you need to know. The Budget will spend a total of £809 billion ($1 trillion U.S.), adding £41 billion to the national debt. It makes two policy changes to address the housing shortage, the most important issue to young Brits. Hammond pledged £15.3 billion to build 300,000 homes a year – but none on the so-called greenbelt,...
Why increasing job safety lowers workers wages
Note: This is post #58 in a weekly video series on basic microeconomics. Here’s a surprising fact: Firms have an incentive to increase job safety, because then they can lower wages. In this video by Marginal Revolution University, economist Alex Tabarrok explores this claim in much greater depth and answers the questions: Why do riskier jobs often pay more? Why has job safety increased over the years? How does a firm’s profit motive play a role? (If you find the...
6 Quotes: C.S. Lewis on government, economics, and freedom
The beloved novelist and Christian thinker C. S. Lewis was born on Nov. 29, 1898, in Belfast, Ireland. In honor of his 119th birthday, here are six quotes from Lewis on government, economics, and freedom: On democratic government: “I am a democrat because I believe in the Fall of Man. I think most people are democrats for the opposite reason. A great deal of democratic enthusiasm descends from the ideas of people like Rousseau, who believed in democracy because they...
Against canned food drives: When gift-giving is wasteful
During a season such as Christmas, when hyper-consumerism and hyper-generosity often converge in strange and mysterious ways, how much of our gift-giving is inefficient or wasteful? It’s a question that economists continue to ponder, but to which many a gift-giver is prone to shrug. In one sense, isn’t the whole pointto mirror the most extravagant gift of all? Why be concerned about “wasteful” giving? But if the starting points of our generosity e decidedly apathetic or misaligned with actual human...
Natural rights revisited during Salamanca University’s 800th anniversary
Note: Some PowerBlog readers might be wondering why the Acton Institute is holding a Rome, Italy, conference on November 29:Globalization, Justice, and the Economy on 16th and 17th Century Spanish scholasticism (The conference will be broadcast on LiveStream. More information here.) Below is an overview of the importance of this school of thought and the historical implications for the nascent era of globalization. With a royal charter established in 1218, a vibrant cathedral school became the Universidad de Salamanca, the...
Russia still denies the Holodomor was ‘genocide’
Saturday marked “Holodomor Remembrance Day,” honoring the millions of Ukrainians who died of forced starvation at the hands of the Soviets in the 1930s. Some 80 years later, and a quarter-century after the Soviet Union’s dissolution, the Russian government still denies that this atrocity constitutes a “genocide.” Two days earlier – Thanksgiving Day in the U.S. – Russian Foreign Ministry Spokesperson Maria Zakharova told the international press that the Ukrainian government’s use of the phrase “the genocide of Ukrainians” is...
Appreciating the importance of vocational education
If there is one thing young people believe in collectively, it is their individuality. “No two people are alike,” the refrain goes. But in the age of Common Core, educational systems too often treat all students alike, glossing over their unique skills and abilities. A top-down, cookie-cutter curriculum and the decline of vocational education have left too many children, on both sides of the Atlantic, without an ability to exercise their gifts. Erik Lidström, who has written extensively on educational...
Why we need the profit system
There is a paradox when es to profits, says economist Arnold Kling: while the profits that accrue to any given individual may be unjust, the profit system itself is necessary in order to have a modern, progressive society. There is no simple way for us to enjoy the benefits of the system while ing all of the instances of injustice. Yet despite the injustice, says Kling, the profit system is the most effective, humane way to organize economic activity. The...
Wealth creation within global cultural perspectives
Economic development is a key aspect of culture—and at the same time, a challenge to cultural norms. How should Christians reconcile such tension? What is culture’s impact upon the biblical mandate to create wealth for holistic transformation? Earlier this year two evangelical groups, theLausanne MovementandBAM Global, released apaper exploringwealth creation within global cultural perspectives to address these and other questions about culture and wealth creation. In particular, the paper examines the ‘anthropological temptation’: the temptation to idolize culture, and to...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved