Home
/
RELIGION & LIBERTY ONLINE
/
Dodd-Frank: Regulation Cannot Build Character
Dodd-Frank: Regulation Cannot Build Character
Feb 19, 2026 1:58 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
Radio Free Acton: Paul Kengor on Reagan and Pope John Paul II; Upstream on It and Mother!
On this episode of Radio Free Acton, Caroline Roberts talks with Paul Kengor, professor of political science at Grove City College about his new book on the extraordinary relationship between President Ronald Reagan and Pope John Paul II. Then, on the Upstream segment, Bruce Edward Walker talks with James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, about the recent horror films It and Mother!. Check out these additional resources on this week’s podcast topics: Read...
From mendicants to merchants: The monastic embrace of enterprise
“If a man does not work, neither shall he eat,” wrote the Apostle Paul in the New Testament. But what if your vocation demands that you own nothing and spend much of your time in contemplation of ethereal mysteries? In time, even religious orders intended to live as mendicants (beggars) allowed some system of ownership. Occasionally, without any profit motive, monasteries acquired not insignificant fortunes. Some also engaged in enterprise – offering products they created on the open market. “In...
Explainer: What you should know about Trump’s tax reform framework
Later today in a speech in Indiana, President Trump will outline his tax reform framework. Here’s what you should know about the president’s plan: What are the goals of the tax reform framework? Trump’s tax plan has four stated goals: 1. Make the tax code simple, fair and easy to understand. 2. Give American workers a pay raise by allowing them to keep more of their hard-earned paychecks. 3. Make America the jobs magnet of the world by leveling the...
Pope, Patriarch need theology of civilization
Today at Public Orthodoxy, I examine the recent claim of Pope Francis and Ecumenical Patriarch Bartholomew that The human environment and the natural environment are deteriorating together, and this deterioration of the planet weighs upon the most vulnerable of its people. The impact of climate change affects, first and foremost, those who live in poverty in every corner of the globe. This is true so far as it goes, but something is missing: “the developing world, as the term indicates,...
Explainer: What you need to know about the 2017 German presidential elections
On Sunday, German voters cast their ballots for members of the national parliament, the Bundestag, and Angela Merkel appears poised to serve a fourth term as chancellor. But with a much-diminished number of supporters, fierce populist opposition, and warring coalition allies, her tenure could prove tenuous. Populism has surged in the nation, carrying into parliament representatives from both the so-called “far-Right” and far-Left. And Merkel faces the prospect of trying to form a new coalition capable of uniting fiscal conservatives...
How should Christians respond to economic disruption?
I graduated from college in 2008 at the height of the Great Recession. It wasn’t the greatest time to be looking for a job, but nevertheless, I somehow managed to get hired at a global FORTUNE pany. I had conquered! I had succeeded! Alas, within a few months, several of my fellow coworkers were let go and their jobs were offshored to the Philippines and Mexico. It was the first in a series of layoffs e, and I soon realized...
Samuel Gregg on Germany’s populist surge
Following the election results in Germany this past Sunday, Chancellor Angela Merkel has been re-elected to serve for a fourth term. In his article “Germany Revolts“, Samuel Gregg describes Chancellor Merkel’s party as being “woefully out of touch” with the German people, and as a result many are abandoning the CDU/CSU coalition for the AFD. Perhaps the most important lesson to glean from the election, Gregg says, is that Germany is increasingly reflecting frustrations felt elsewhere in Europe. The European...
Houston’s culture of rugged communitarianism
In the late 1920s, a primary theme of Herbert Hoover’s presidential campaign was the idea of “rugged individualism,” the practice or advocacy of individualism in social and economic relations emphasizing personal liberty and independence, self-reliance, resourcefulness, self-direction of the individual, and petition in enterprise As Hoover said about the era in the U.S. after the Great War, “We were challenged with the choice of the American system ‘rugged individualism’ or the choice of a European system of diametrically opposed doctrines...
Freedom and responsibility can turn back the tide of populism
“Today, populism is a global plague.” However, a thought-leader who played a pivotal role in weakening populism in Europe has shared the antidote in a speech to theEuropean Liberty Forumin Budapest. Zoltán Kész, a founder of theFree Market Foundationin Hungary, who was elected to parliament in 2015, gave one of the keynote addresses of the two-day forum, organized by the Atlas Network, last Thursday. In addition to leading a think tank dedicated to liberty, Kész was elected as an independent...
Introduction to price discrimination
Note: This is post #50 in a weekly video series on basic microeconomics. Price discrimination mon, says economist Tyler Cowen. Movie theaters charge seniors less money than they charge young adults puter panies sell to businesses and students at different rates, often offering discounts to students. These price differences reflect variations in the elasticity of demand for these different groups. When demand curves are different, it is more profitable to set different prices in different markets (If you find the...
Related Classification
Copyright 2023-2026 - www.mreligion.com All Rights Reserved