Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Feb 24, 2026 10:20 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
Secular Universities in Decline?
In his New York Times column this week, Peter Steinfels has an insightful analysis of an intriguing and provocative new book by C. John Sommerville, The Decline of the Secular University. Those who study the history of American academia are familiar with the story of the secularization of universities as recounted expertly by Christian scholars such as George Marsden (The Soul of the American University) and James Burtchaell (The Dying of the Light), who decry the shunting of religion from...
Original Sin
Headline: It’s a Sin to Fly, Says Church Actually, "It’s a Sin to Fly, Screams Headline" would be more appropriate. Here’s what the Church (or rather, the Bishop of London) actually says: “Making selfish choices such as flying on holiday or buying a large car are a symptom of sin. Sin is not just a restricted list of moral mistakes. It is living a life turned in on itself where people ignore the consequences of their actions.” I think there’s...
Connect the Energy Dots…
Today’s NYT editorializes: “a country that consumes one-quarter of the world’s oil supply while holding only 3 percent of the reserves will never be able to drill its way to lower oil prices, much less oil independence.” You’ll often hear plaint that Americans use more than their fair share of the world’s oil. We’re addicted to it, some say. After all, so goes the reasoning, we have less than one-half of one percent of the world’s population, but we “consume...
Carbon Communism
It’s a deceptively simple idea. Everyone would be allocated an identical annual carbon allowance, stored as points on an electronic swipe-card. Points would be deducted for every purchase of non-renewable energy. People who did not use their full allocation, such as people who do not own a car, would be able to sell their surplus carbon points into a central bank. High energy users could then buy them – motorists who used their allocation would still be able to buy...
An Evangelical Response to Global Warming
Today in Washington: Christian Newswire — Amid mounting controversy among evangelical Christians over global warming and climate policy, the Interfaith Stewardship Alliance presented “A Call to Truth, Prudence and Protection of the Poor: An Evangelical Response to Global Warming” at the National Press Club Tuesday morning. The paper is a refutation of the Evangelical Climate Initiative’s “Climate Change: An Evangelical Call to Action,” released last February, and a call to climate policies that will “better protect the world’s poor and...
Seek Dignity? Then, “You Gotta Shake Your MoneyMaker”
The Super MoneyMaker Pressure Pump No, we’re not talking about Elmore James’ Blues hit covered by the likes of George Thorogood, Fleetwood Mac and The Black Crowes nor its racy subject matter. Rather, it’s how members of the other oldest profession in Kenya and Tanzania power the irrigation pumps that extend both their growing season and range of crops. This foot-powered move beyond subsistence farming to much more profitable harvests, such as vegetables, is facilitated by the aptly named MoneyMaker series...
Federal Funding for the Humanities
Hunter Baker, blogging at his new home on the American Spectator Blog (recently added to our blogroll), responds to a post by James G. Poulos, which emphasizes President Bush’s “proposed emphasis on math and science education, to the patent detriment of the humanities.” Says Baker, “Although I am a faithful disciple of the humanities, I often fort in the fact that the majority of students won’t have much exposure to the offerings on hand. Better they remain busy with their...
Potty-Mouthed President
The amount of media attention over the past week’s devoted to President Bush’s utterance of a “naughty” word has been incredible. Maureen Dowd uses it as just one more bit of proof supporting her depiction of the president as a frat-boy, who “has enshrined his immaturity and insularity, turning every environment he inhabits — no matter how decorous or serious — into fortable frat house.” She writes, “No matter what the trappings or the ceremonies require of the leader of...
More on Secularism and Universities
Just a brief note addition to Kevin’s post: the free article from May’s Touchstone magazine is Terence O. Moore’s feature, “Not Harvard Bound.” A key quote: The elite schools no mand the reverence and deference of red-state America. The parents and students of “flyover country” are starting to put their money where their morals are or where they believe truth is. There’s a discussion of Moore’s article at Touchstone‘s reader discussion site, Treaders. HT: Mere Comments ...
Beyond Black and White: New Realities of Race In America – BUMPED: Video now available
Anthony Bradley delivers his remarks last Wednesday The 2006 Acton Lecture Series continued today with Anthony Bradley’s presentation of Beyond Black and White: New Realities of Race In America. Mr. Bradley is an Acton research fellow and assistant professor of Apologetics and Systematic Theology at Covenant Theological Seminary in St. Louis, Missouri. His lecture describes the new market trends which reflect the changing demographics in America. With a decline in population amongst whites, a stagnated black population, and the ever-increasing...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved